Following Evergrande, Kaisa and Sunac, Shimao Group failed to make a bond payment this Sunday July 3rd, 2022.

While interests have a grace period, principal payments do not, and this bond payment has both. The firm is now officially in default.

It is ranked among the top 10 real estate developers in China, handling large residential properties.

• The firm’s 2021 net profits plunged 62% from 2020, and its debt had been trading at a discount for months.
• Shimao had failed to make a full payment in January on a 645 m yuan ($101 million) coupon.
• A China Index Academy survey indicated that prices for new home have plunged 40% since the beginning of this year.

The contagion is not finished, and the Chinese government will have difficulty containing such a large bubble burst. Deemeed the largest bubble in teh world, the Chinese real estate’s downfall is expected to have a significant impact on the Chinese economy and the world’s growth.

References

• Bloomberg Law, July 5, 2022, Shimao Creditors Get Organized After $1 Billion Bond Default
• The National News, July 4, 2022, Chinese developer Shimao defaults on $1bn bond amid worsening debt crisis
• CNN, July 4th, 2022, China’s real estate crisis deepens as big Shanghai developer defaults
• Reuters, July 3, 2022, Chinese property developer Shimao misses repayment on $1 billion bond
• Nasdaq, January 6, 2022, Chinese developer Shimao defaults on trust loan – letter
• Navesink International, December 7, 2021, China Evergrande heads towards default
• Navesink International, November 18, 2021, Evergrande default is highly likely, S&P says
• Navesink International, October 10th, 2021, The world’s largest Ponzi is bursting – the Evergrande default