China’s CIFI suspends all offshore debt payments, starts restructuring

HONG KONG (Reuters) -Shanghai-based property developer CIFI Holdings said on Tuesday it has suspended payments on all of its offshore debt after it failed to reach an agreement with creditors to which it owes $414 million in total.

CIFI said in a filing it has engaged Haitong International Securities Company Limited as financial advisor and Linklaters as legal adviser to facilitate a restructuring of its $6.85 billion offshore debt, as it is likely to come under continued pressure to generate sufficient cash flows for repayments.

The company’s shares plunged 26% by midday following the lifting of a trade suspension that had been in place since Thursday.

CIFI’s default is another blow to a deepening debt crisis in the sector, following the resignation of Longfor Group’s chairwoman and state-backed Greenland Holdings’ request to extend some offshore bond repayments on Monday.

CIFI and Longfor had borrowings of 114 billion yuan ($15.61 billion) and 212 billion yuan, respectively, as of June, and Greenland had 122 billion yuan.

While Beijing-based Longfor has not run into liquidity problems, the three companies were considered safer bets previously with state support on their financing.

These events are likely to worsen investor concerns about China’s property sector at a time when already weak sales are likely to be weighed by fresh COVID lockdowns across the country.

Longfor recovered 5.2% after plummeting 24% on Monday, while Shanghai-listed Greenland dropped 0.8%. Hong Kong’s broader Hang Seng Mainland Properties Index rose 1.1% while China’s CSI300 real-estate sub-index fell 2.2%.

In the Tuesday filing, CIFI said the failure to meet offshore debt obligations was because of a further deterioration in sales and credit available to the industry in China since September and heightened payment pressure triggered by a ratings downgrade.

But it added its offshore debt issues do not materially affect its onshore financing arrangements as a whole and that its commercial operations remain normal.

CIFI said it has approached some creditors with a request that they form a coordination committee and an ad hoc group of bondholders, at the firm’s expense for their legal advice, to facilitate the restructuring talks.

CIFI said on Oct. 13 it had not met certain offshore interest and amortisation payments due to delays in remittances during an extended holiday in mainland China. Analysts said the obligation involved was a coupon payment of a $319 million convertible bond.

($1 = 7.3040 Chinese yuan)

(Reporting by Clare Jim; Editing by Kim Coghill and Sam Holmes)