New Report: China Real Estate Analysis
Reorg has compiled a non-exhaustive list of almost 100 onshore bond principal and coupon payment extensions which occurred in 2022 and January 2023, conducted by 15 Chinese real estate developers with offshore USD note issuances within Reorg’s scope of coverage. This summary analysis compares and contrasts the revised repayment schedule and credit enhancements offered under these extensions.
- The contrasting “piecemeal” approach involves principal payment extensions of around one year for individual onshore bonds.
- In exchange for onshore principal payment extensions, issuers have pledged equity stakes in onshore project companies as credit enhancements for onshore bondholders.
- The impact of these types of onshore bond extensions is negative for offshore noteholders, as collateral and temporal subordination compounds offshore noteholders’ already structurally subordinated position in credit structures for Chinese issuers.
- Inclusion of relatively long grace periods for both missed principal and coupon payments – in some cases as long as 50 business days – is non-standard when set against offshore liability management exercises involving offshore notes and significantly weakens onshore bondholder protection.