(Bloomberg) — Zhenro Properties Group Ltd.’s shares and dollar bonds plunged Friday, with traders citing concern that the Chinese builder won’t redeem a $200 million bond next month as planned.
The 10.25% perpetual note in question slumped to 35 cents on the dollar from 93 cents Thursday, according to data compiled by Bloomberg, and some other dollar bonds were on pace for record lows after falling at least 10 cents. Shares ended down a record 66% in Hong Kong and an onshore bond maturing in 2024 fell 23%, the most in over a month.
Zhenro, China’s 30th largest builder by contracted sales last year according to China Real Estate Information Corp., didn’t have an immediate comment when reached by Bloomberg.
The Shanghai-based developer said last month it would redeem the note on March 5, which boosted its price close to par. One bondholder of the firm’s other notes spoke to a company official on Friday and was told Zhenro plans to redeem the perpetual bond, the investor said, asking not to be named citing private information about their holdings.
Zhenro’s other dollar bonds trading around 40 cents indicate investors consider the company “having a high possibility of restructuring,” said Daniel Fan, a credit analyst at Bloomberg Intelligence.
Chinese developers have faced months of worries about their debt-repayment abilities, as new-home sales and many builders being unable to refinance borrowings. The sector saw a record number of defaults last year, in part on government efforts to curtail property-related debt growth.
Although the broader high-yield dollar bond market rose Friday on signs of policy loosening in pre-sales funds, concerns remain over developers’ financial health with risks such unreported debt.
Worries on Zhenro’s debt also weighed on peer Ronshine China Holdings Ltd. Some of its dollar bonds were on pace to finish at their lowest levels on record, while shares fell 7.3%. Ronshine Chairman Ou Zonghong is a brother of Ou Zongrong, who is Zhenro’s controlling shareholder, according to Hong Kong stock exchange filings and Bloomberg-compiled data. Ronshine didn’t immediately respond to Bloomberg’s request for comment on Friday.
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