Another well-known real estate company announced a debt default

Agile said that the focus of the next step will be to "ensure delivery, quality, service, and stable operation".

Zhongfang Daily reporter Zeng Dongmei reported from Guangzhou

In this unusually cool May, another private real estate company in Guangzhou fell into a debt crisis.

On May 14, Agile Group Holdings Co., Ltd. (hereinafter referred to as "Agile", 03383.HK) issued an announcement revealing that it had not paid interest on a US dollar debt within the grace period and was expected to be unable to meet all payment obligations under the offshore debt.

In the past three years, private real estate companies have been out of danger one after another, and Agile has persisted until 2024 due to its positive repayment attitude. Chen Zhuolin, chairman of the company's board of directors, also has optimistic expectations for the market in the first half of 2023, believing that it can turn losses into profits in 2024 or 2025 at the earliest.

"No way." An executive of a private real estate company lamented that in terms of the current market environment, it is only a matter of time before a real estate company encounters a liquidity crisis. "I admire Chen Zhuolin's attitude of not lying down. Effort is important, but effort doesn't mean success. ”

Agile said that the focus of the next step will be to "ensure delivery, quality, service, and stable operation".

The interest on US dollar bonds is not yet paid

According to the announcement, in October 2020 and November 2020, Agile issued US$483 million of senior notes, due in 2025, with a coupon rate of 6.05%, and the interest payment date is April 13 and October 13 of each year.

According to Agile, the company did not pay the interest until the grace period expired on May 13 because it was facing liquidity pressures.

Agile said that China's real estate industry continues to be on a downward trend, and sales in most regions remain sluggish. In the first four months of this year, the company's pre-sale amount was 6.55 billion yuan, down 68% and 73.9% respectively from the same period in 2023 and 2022. Financing and refinancing are becoming more difficult.

Next, the company considered engaging external financial advisers and legal advisers to seek a feasible holistic solution to its offshore debts. At the same time, we will continue to take measures to speed up the pre-sale of properties, accelerate the collection of sales proceeds, and strive to improve the balance sheet situation.

Tight funds are a common problem faced by private real estate companies, but the outside world did not expect Agile to take risks in 2024 because the company has no US dollar bonds due this year.

As of the end of 2023, Agile's interest-bearing liabilities amounted to approximately RMB53.554 billion, including RMB32.695 billion of bank borrowings and other borrowings, RMB12.339 billion of senior notes, RMB8.52 billion of domestic bonds, RMB22.469 billion of bank and other borrowings due within one year, and RMB3.4 billion of domestic bonds due within one year. Approximately $9.17 billion of senior notes maturing over 1 year and 2 years, with the latest US dollar bond maturing in early 2025.

One investor said that as early as 2022, Agile should have followed the trend in debt restructuring. "If you knew this was the case, you shouldn't have insisted on it. It's not easy to struggle to survive until now. However, "it is always respectable to do your best to insist on paying back." ”

Agile told China Real Estate News that the company deeply regretted the failure to repay the interest on the notes, although it had worked hard for nearly four years, but the market recovery and the improvement of the refinancing environment did not meet the company's expectations. In the next step, the company plans to strengthen its delivery capacity, efficiency and quality, protect the rights and interests of all parties, and maintain and improve the operational stability of the enterprise.

It is understood that as of May, the company's project groups resumed work as scheduled at 96%.

Chen Zhuolin lost to the market

From the perspective of funds, Agile has long been in a state of stretching. At the end of 2021, the company's discretionary cash was about 22.8 billion yuan, but the short-term debt due within one year reached about 29.58 billion yuan. Although cash cannot cover short-term debt, in 2022, the company repaid nearly 25 billion yuan of debt through share allotment, sale of projects for cash, and new financing.

At the end of 2022, Agile held about 16.09 billion yuan of cash and bank deposits, of which 7.628 billion yuan was restricted cash, and 24 billion yuan of short-term debt due within one year. This means that the debt repayment pressure in 2023 should not be underestimated, and in the end, Agile has survived.

According to the 2023 annual report, as of the end of the period, the company's discretionary cash flow was only 8.637 billion yuan, and the interest-bearing liabilities due within one year were 25.87 billion yuan. Referring to the experience of the past two years, the industry believes that Chen Zhuolin will also adhere to the promise of debt payment.

BOCOM International held a conference call with Agile's management at the end of 2023 and learned that the company's main debt maturities in 2024 are two offshore syndicated loans totaling HK$7 billion, and two bonds issued under the guarantee of China Bond Enhancement Company, with a total principal amount of 1.9 billion yuan. The agency believes that Agile has a chance to achieve the rollover of the two debts.

At the beginning of February this year, Agile also said that a number of projects in many cities were clearly included in the white list by the local housing and construction departments, and the funding situation is expected to improve. Unexpectedly, more than 3 months later, the company's cash flow still did not improve, and even the interest could not be paid.

The above-mentioned industry insiders believe that although Agile's insistence on debt repayment in the past few years has won a lot of praise in the capital market, the company has sold a lot of high-quality assets in order to just redeem it, and it is only now starting to start a comprehensive debt restructuring, which is much more difficult than in the previous two years.

Zhang Hongwei, founder of Jingjian Consulting, said that in the past month, Dongyuan Real Estate and Agile have been out of insurance one after another, which is not only a problem of the company's own operation, but also a common problem in the industry under the background of the market overfall. "In other words, the bailout policies of the past two years have not played a role in stimulating the recovery of market trading volumes." Especially in lower-tier cities. If the number of projects in these cities is relatively large, the continuous decline or even over-fall of market fundamentals will inevitably drag down the sales collection of enterprises. From the perspective of the financing environment, whether it is direct financing in the open market or the implementation of relevant policies such as the "white list", it is not smooth at present, and the financing difficulties of private real estate enterprises have not been significantly improved.

He suggested that non-first-tier or strong second-tier cities should introduce more vigorous rescue policies to activate the demand for the property market and reduce inventory as soon as possible. Only when the fundamentals of the property market in these cities improve, can the overall property market be truly improved, and the operating pressure and liquidity risk of enterprises can be effectively alleviated.