Sunac China Holdings Ltd. plunged by a record Thursday as its stock trading resumed following a yearlong suspension, in a sign of entrenched pessimism toward some of China’s weakest developers.
(Bloomberg) — Sunac China Holdings Ltd. plunged by a record Thursday as its stock trading resumed following a yearlong suspension, in a sign of entrenched pessimism toward some of China’s weakest developers.
The stock dropped as much as 59% in Hong Kong in its first trading since April 1 last year, before paring the loss slightly at noon. The resumption came after Sunac said it has met stock exchange requirements such as releasing overdue financial results.
The selloff is a reminder of lingering concerns about the prospects of China’s most debt-laden developers amid a nascent but patchy housing recovery. Echoing the fragile mood in the stock market, most of Sunac’s dollar bonds remain at deeply distressed levels, indicating investor skepticism about the defaulter’s proposed restructuring plan.
“The trading resumption could aid its restructuring, which includes a debt-to-equity swap option,” Bloomberg Intelligence analyst Kristy Hung wrote in a note. Sunac could “regain access to equity raising” given the pressure to shore up its balance sheet.
Sunac, once among China’s biggest developers, suffered its first public dollar bond payment failure last year amid a record wave of delinquencies in a sector hit by cash shortages and slumping sales. The firm said in late March it has reached agreement with a group of key bondholders as it laid out details of a debt-restructuring plan.
As of the end of last year, Sunac had borrowings totaling about 298 billion yuan ($43 billion) against around 38 billion yuan in cash balance, according to its latest annual report. The builder’s latest offshore restructuring plan is aimed at tackling $9.1 billion worth of foreign-currency debt.
The developer said in a Wednesday stock exchange filing that it is in the process of implementing the restructuring plan and that it has “a sufficient level of operations and assets of sufficient value to support its operations.”
A Bloomberg Intelligence gauge of Chinese property stocks fell 23% during Sunac’s trading halt. The sector’s broad-based weakness has persisted even after Beijing made sweeping efforts late last year to ease the unprecedented housing crisis, with steps including financing support for builders and stimulating home demand.
“Since the bond defaults, Sunac has suffered from very weak property sales due to a lack of homebuyers’ confidence on Sunac’s ability to deliver homes,” JPMorgan Chase & Co. analysts including Karl Chan wrote in a note. “Despite occasional asset disposals, we think the situation for Sunac remains very challenging, and most cash inflows will likely be prioritized for construction completion.”
–With assistance from Yuling Yang.
(Updates stock price and with more analyst comments)
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