What’s new: Hong Kong-listed shares of China Aoyuan Group Ltd. closed down 11% on Friday, a day after the real estate developer said that its creditors had demanded repayment of $651.2 million.
In a stock filing Thursday, Aoyuan attributed the demand to a series of ratings downgrades, warning shareholders that it may be unable to repay its debts due to liquidity issues.
The world’s Big Three credit rating agencies — S&P Global Ratings, Fitch Ratings and Moody’s Investors Service — have all downgraded their ratings of Aoyuan in the past two months, activating terms under which certain offshore loans became immediately payable, according to the filing.
The Guangzhou-based company said that there may be a “material adverse” impact on its business if it was unable to repay the loans or reach an agreement with creditors.
Aoyuan’s inability to repay the offshore loans could eventually lead to a default as overseas creditors normally tend to act in accordance with agreements and are unwilling to extend the debt repayment time, Huang Lichong, co-founder of Synergy Solution Management Group, told Caixin.
The background: Thursday’s announcement comes as some of China’s big-name property developers face liquidity crises that have fueled creditor fears over their inability to repay debts.
On Friday, the Guangdong provincial government summoned China Evergrande Group Chairman Hui Ka Yan and decided to send a working team to the debt-ridden developer to help “resolve its risks, enhance its internal risk management and maintain its normal business operation.”
Contact reporter Ding Yi (yiding@caixin.com) and editor Flynn Murphy (flynnmurphy@caixin.com)
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