Credit rating agencies continue to push Chinese developers on to the junk pile, as rating cuts continue. More companies, previously not seen as high risk, are surprising markets with bad news bringing another debt crisis there. This signals that mass defaults are coming.
Logan Group, which operates prime residential and commercial properties in China’s Greater Bay Area, including Shenzhen, was downgraded three notches to CCC- by S&P Global Ratings on Friday. It cited a likely restructuring of its onshore debt plus its large amount of debt maturities. Peer Times China also received a downgrade by Fitch. Shares of both companies have plunged more than 80 per cent in the past year.
Logan has a serious crunch with about $1bn in bonds maturing this year, not much less than its market capitalisation. It has guaranteed private placement notes of around a similar amount, which it now may have to repay. Its three-year dollar bond fell to 13 cents on the dollar on Friday from 95 cents in December.