China developers confront a $197 billion bond challenge in January

Beijing: China’s property developers have mounting bills to pay in January and shrinking options to raise necessary funds.

The industry will need to find at least $197 billion to cover maturing bonds, coupons, trust products and deferred wages to millions of migrant workers, according to Bloomberg calculations and analyst estimates. Beijing has urged builders like China Evergrande Group to meet payrolls by month-end in order to avoid the risk of social unrest.

Policy for the property market remains tight even after China in December pivoted toward supporting economic growth. Future focus is likely to be on ensuring homes are delivered, and the country’s central bank is encouraging financial firms to help acquisition activity in the real estate sector. Bond payments for stressed firms are larger this month than November and December combined.

Calculations of January’s bill include: For smaller or struggling firms it’s unclear where the cash will come from. Yields have been so elevated offshore that the dollar bond market remains effectively shut for refinancing, a situation that HSBC Holdings Plc analysts predict will continue for at least another six months. Only a handful of the strongest private-sector builders have recently tapped the interbank credit market onshore, while low stock valuations limit the scope for equity financing.

Generating higher revenue from a weakening property market remains a challenge. Also, companies like Evergrande have struggled to sell non-core assets.

For builders whose debt had the worst 2021 returns in a Bloomberg index of China high-yield dollar bonds, below is a week-by-week calendar for interest and principal payments due on local and offshore notes. Some payments may have grace periods unless otherwise stated.