Tianjin-Backed Developer Defaults on $31 Million Due Bondholders
The debt woes of Tianjin Real Estate Group, a developer backed by the government of northeast China’s port city Tianjin, deepened after it defaulted on 215.8 million yuan ($31.3 million) due Wednesday to bondholders.
It was the company’s first default on public debt amid a long-running struggle to sort out a restructuring plan. As of the end of May, the company also defaulted on nearly 15 billion yuan of bank loans.
Tianjin Real Estate Trust Group Co. Ltd., a wholly owned subsidiary of Tianjin Real Estate, failed to repay bondholders principal of 200 million yuan on which investors sought to exercise options to sell bonds back to the company plus interest of 15.8 million yuan, the Shanghai Stock Exchange said Thursday in a statement.
The default dealt a fresh blow to Tianjin Real Estate, which since 2018 has been embroiled in a multibillion-dollar debt crisis and graft probes involving top executives. The company’s two-year effort to find new investors and restructure its debts have largely stalled because of the financial complexity, Caixin learned.
“Tianjin Real Estate is a typical example of real estate-market distortion over the past two years which fueled local land price surge but caused financial woes to themselves,” a person close to the situation said.
Tianjin Real Estate is among several city government-backed property companies to run into difficulties in Tianjin as the city’s real estate market cools and as curbs tighten on speculative investment. The crisis was partly due to aggressive land acquisitions under instructions from the Tianjin government to bolster the local property market, several people close to the company said. Many of the deals were at excessive prices and didn’t make money.
Tianjin Real Estate Trust attributed the default to a cash shortage and difficulties raising funds. The default will further worsen the company’s fundraising capability and business operations, it said. The parent Tianjin Real Estate bears unconditional responsibility for the full amount of bonds including principal, interest and any potential penalties and damage to creditors.
In April, Tianjin Real Estate revealed a plan to sell 65% of its city government-owned stake to new investors in a restructuring effort. Caixin learned that leading developers including China Vanke Co. Ltd. and Country Garden showed interest in the deal.
But the asset sale was hindered by corruption investigations involving several of the company’s senior executives, including Chairman Di Da. Caixin learned that the Di investigation is linked to the case of Huang Xingguo, the former mayor and acting party chief of Tianjin. Huang was expelled from the Communist Party on corruption charges in 2017 and faces prosecution on criminal charges.
In late 2018, state-owned Poly Real Estate Group Co. stepped into Tianjin Real Estate’s operations, raising speculation of a possible takeover. But no deal was reached, and Poly stepped away in April 2019. Later, privately owned Sunac China Holdings Ltd. agreed to take part in Tianjin Real Estate’s restructuring, but that plan was also dropped.
As of March 31, 2019, Tianjin Real Estate had total assets of 171.1 billion yuan with liabilities amounting 180.8 billion yuan, data obtained by Caixin from a company source showed.
Contact reporter Han Wei (email@example.com) and editor Bob Simison (firstname.lastname@example.org).
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