Chinese property group Shimao feels chill of sector’s liquidity crisis

Chinese property group Shimao feels chill of sector’s liquidity crisis

In late September, as a liquidity crisis at Evergrande put traders on high alert around the world, the bond prices of another Chinese property developer told a different story.

Shanghai-based Shimao, named after a father and son duo who have run the company since 2001, was rated investment grade by Fitch and deemed a safe bet. Even as Evergrande’s bonds plummeted, Shimao’s held firm.

But months later, its bonds are trading at 63 cents on the dollar and the company with a market capitalisation of close to Rmb22bn ($3.5bn) has been forced to sell its prized assets after being sucked into a property bond market sell-off that has hit China’s biggest offshore borrowers.

The fate of Shimao highlights the vulnerability of China’s real estate companies to the sudden loss of market confidence in the wake of Evergrande’s collapse. Today, a wave of top-rated developers are struggling to refinance and being forced to dispose of assets quickly to repay upcoming debts.

“It’s very hard not only for Shimao but for almost all privately owned developers to refinance in any channel,” said Iris Chen, a Hong Kong-based credit analyst at Nomura.

Evergrande has toiled to complete asset sales. In January, Oaktree Capital, the US investment firm, seized