Finance missed payments on
two separate repo transactions
totalling Rmb248.9m to China
Life Pension, comprising
Rmb100.21m 28-day and
Rmb49.54m 14-day repos due
on June 3, and Rmb99.11m
due on June 6, according to a
document viewed by IFR.
The collateral for those
transactions were bonds from
HNA unit Grand China Air: a
Rmb200m 6% three-year PPN
and a Rmb1bn 6% three-year
PPN due on November 25.
The quality of collateral in
repo transactions has come
under scrutiny since the
takeover of Baoshang Bank.
China has described the case
as an isolated incident, but the
subsequent liquidity squeeze
at smaller banks and non-bank
lenders has raised the risk of
default even on short-term
transactions.
“After the Baoshang incident,
we are keeping our white list
for bonds unchanged to avoid
risks. We only accept bonds by
state-owned companies,” said
a manager at a bank’s asset
management department.
Future Land faces uncertainty
Bonds Chairman’s detention prompts heavy sell-off, downgrade warningsBY CAROL CHANFUTURE LAND DEVELOPMENT HOLDINGS
is facing higher funding costs
after the detention of its
founding chairman forced a
change of leadership.
In a stock exchange filing late
on Wednesday, Future Land said
that its chairman Wang Zhenhua
is being held in criminal custody
by the Shanghai police for
“personal reasons” and has been
removed from his position.
Wang Xiaosong, a non-
executive director of thecompany and the son of Wang
Zhenhua, has been appointed
chairman of the board with
immediate effect.
S&P and Fitch on Friday placed
the Hong Kong-listed Chinese
real estate company and its
outstanding senior unsecured
notes on negative watch, while
Moody’s said the incident was
credit negative.
“In our view, the seriousness
of the allegation and sudden
change in leadership could
have severe repercussions for
Future Land’s reputation and
brand name. This could hurt the
company’s relationships with
business partners and financial
institutions,” S&P said.
S&P has a BB issuer rating on
Future Land and BB– issue rating
on its bonds. Fitch has BB ratings
on the company and its bonds,as well as Shanghai-listed unit
SEAZEN HOLDINGS’ and its offshore
bonds. All are on negative watch.
Fitch warned that investor
perception may affect Future
Land’s capital market or other
financing activities in the near
term.
Future Land’s Hong Kong-
listed shares plunged 24% to
close at HK$8.04 on Wednesday
and its US dollar bonds also
dropped after Chinese media
reported that Wang Zhenhua
had been detained by the
Shanghai police.Future Land’s shares continued
to slump on Thursday and closed
down 10.6% at HK$7.19.
The US dollar bonds of Future
Land and Seazen were down by
3 points at the short end and
6-7 points at the long end on
Wednesday. They continued
to trade weak on Thursday
morning but later drifted higher
at the short end while slipping a
little further at the long end.
Future Land’s 7.5% 2021s
priced in January were quoted
at 96.75/97.95 while its 6.15%
2023s, priced in April, were
quoted at 90.375/91.625 on
Thursday afternoon, according to
Tradeweb. Seazen’s 6.75% 2022s
priced in May were quoted at
93.083/94.50.
S&P sees a potential risk
involving shares pledged by the
former chairman if the group’sshare prices plummet for an
extended period.
“That said, the company is
unlikely to miss a margin call,
should it happen, given the
current liquidity position,” said
the rating agency.
As of June 30, around 34% of
Seazen’s outstanding A-shares
are pledged, out of the 67%
equity held by entities controlled
by Future Land.
Research firm Lucror Analytics
said the development raised
questions over the company’s
corporate governance and
operations, and to some extent
its access to funding.
It changed its
recommendations on the
company’s US dollar bonds
to “not recommended” from
“hold”.
Wang Zhenhua is Future
Land’s controlling shareholder
with a 71% stake.
Nomura’s trading desk said
change of control put options for
the two companies’ onshore and
offshore bonds should not be
triggered for now.
However, it said that there
is still a lot of uncertainty as to
how the situation will evolve and
how long this will drag on.
“If we assume that he [Wang
Xiaosong] will be the new
chairman going forward, there
may be doubts among banks,
equity and bond investors if
he, at the age of 32, could lead
such a sizeable company against
the backdrop of an industry
downturn,” it wrote.
On the other hand, even
if Wang Zhenhua eventually
resumes his position, it is also
uncertain whether the banks
and investors will provide the
same level of support to the
group as before, it said. For daily news stories
visit http://www.ifrasia.comand funding structures,” the
IMF said on June 25 following a
regular consultation mission.
However, the banks question
the need for levels of capital
well above other jurisdictions
and the central bank’s own
stress tests, in a country
whose banking system proved
sufficiently robust to withstand
the global financial crisis
without incurring major losses.
The banks also argued
that some convertible debt
instruments should be an
option as a substitute for part
of the proposed increase in
equity capital, that they be
given more than the proposed
five years to meet any new
requirements and for the
impacts of the changes be
periodically assessed.
The RBNZ will continue
to consider feedback before
publishing a final report in
late November. A five-year
implementation period is due
to begin next April.
“The seriousness of the allegation and sudden
change in leadership could have severe
repercussions for Future Land’s reputation and
brand name. This could hurt the company’s
relationships with business partners and financial
institutions.”If you or your colleagues are photocopying articles from IFR Asia, then your company is breaking the law.
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