China Aoyuan Group is set to become the next Chinese property developer to default on its debt after announcing it will not make payments on four dollar bonds, which will trigger defaults on all its other offshore debt, reports Bloomberg. The company won’t pay off a dollar note that matures Thursday or a separate bond due Sunday, it said in a Hong Kong stock exchange filing late Wednesday.
The notes have a combined $688 million of principal outstanding. The builder also said it wouldn’t pay interest before the end of a 30-day grace period on two other notes. Those periods end Thursday and the coupons total $15.3 million. “Events of default will occur (or have occurred) under all other offshore financial indebtedness of the group,” Aoyuan said in the statement. It said it’s exploring asset sales and is in preliminary discussions with potential investors and purchasers.
Aoyuan becomes the latest Chinese developer to renege on its debt obligations amid a cash crunch sparked by a crackdown on excessive borrowing in the industry. The crisis has fueled a property market slump that has prompted the government to dial back some of the measures, with news on the easing of the use of proceeds from pre-sold homes spurring a bond and stock market rally Wednesday.