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Tianjin government-backed property firm may default
Published on: 2019-06-17
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031Tianjin Real Estate Group, a developer backed by the Tianjin government, could default on a 550 million yuan trust product, in a sign that Beijing’s deleveraging campaign is affecting state-owned enterprises as well.

Tianjin Real Estate, which is controlled by the local state asset supervision and administration commission, was due to pay back part of a trust product for principal and interest worth more than 200 million yuan on May 18. But the company did not submit a plan for repayment by May 10, which prompted the trust product manager, China Citic Trust, to issue a notice on Friday warning investors about default risks.

Investors sold corporate bonds under Tianjin Real Estate afterwards, sending bond yields up to 34.8 per cent on Friday afternoon. China Citic Trust, however, posted another announcement in a few hours, saying Tianjin Real Estate had made assurances about the repayment but did not elaborate.

The trust product has raised more than 550 million yuan. Tianjin Real Estate is indebted to dozens of financial institutions, with an outstanding loan of more than 108.2 billion yuan.

030More than a dozen private companies have defaulted so far this year. Alternative financing channels have narrowed as China moves to cut debt and build a culture of more disciplined bank lending, making it increasingly difficult for some companies that depend on this sector for liquidity and refinancing to source credit. Investors will have to brace for more jitters in the credit market, said analysts.

More than 10 companies, mostly privately owned and from a variety of industries, have defaulted on 15 bonds worth more than 12.8 billion yuan, according to figures from China Central Depository and Clearing Company, which manages and promotes the sector.

“Default rates are rising [in China] because weaker companies are having trouble refinancing amid stricter financial regulation,” S&P Global Ratings said in a report released on Monday.

In April, the Chinese central bank lowered banks’ required reserve ratio to release liquidity into the financial system, but analysts from S&P said they expect administrative tightening to continue.

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