Behind zenro’s foreclosure storm


After the Spring Festival, the debt repayment cloud still hangs over the head of real estate enterprises, while the capital market reflects the heavy pressure of real estate.On February 11, Hong Kong stock Zhenro Real Estate plummeted, as of press time, the decline extended to 65% to hk $1.28, continuing the record drop, the latest market value of HK $5.591 billion.Due to share price fluctuations, The company triggered the market Volatility Adjustment Mechanism (MDR) at 1:19 PM and entered a five-minute cooling-off period. Transactions were limited to BETWEEN HK $2.47 and HK $3.33 and closed at 1:24 PM.Then, the Shanghai Stock Exchange announcement, “20 Zhenrong 03” afternoon trading abnormal fluctuations.In accordance with the Trading Rules of the Shanghai Stock Exchange and the Rules for real-time Monitoring of Abnormal Trading of Securities of the Shanghai Stock Exchange, the stock exchange decided to suspend trading of zhenro 03 (175097) at 14:16 on February 11, 2022 and resume trading at 14:46 on February 11, 2022.Similarly, Zhenro Services plunged in the afternoon and its shares fell nearly 80 per cent to HK $0.79. Their latest market value was HK $788 million, both new lows since listing.In addition, a us $200 million perpetual bond of Zhenro Property continued to plunge, falling below 70 at 18:30 on February 10.In less than half a day, a large area of stocks and bonds fell in The Zhenro system, due to the market rumor that Zhenro will restructure all us dollar bonds and sell the self-managed bonds, resulting in a large scale selling of PB notes of the perpetual bonds.The sell-off was mainly due to the planned redemption or non-execution of the $200 million perpetual debt.In the redemption notice issued by Zhenro on January 4, 2022, the outstanding amount of the securities stated as the redemption amount is added to any distributions (including any outstanding distributions and any additional distributions) accumulated up to the specified redemption date (but not including that date).This amount of real estate industry today, is not a small number.Looking back on the perpetual notes at the centre of the storm, the first was the issuance of US $200 million of senior perpetual capital securities by Zhenro Real Estate on June 13, 2019. The net proceeds from the issuance were to refinance existing debt.In terms of subscription of bonds,Deutsche bank ag, standard chartered bank, BNP paribas, CCB international, clsa, China merchants bank international, Goldman Sachs(Asia) L.L.C., haitong international, bank of east Asia limited and HSBC have been appointed as joint global coordinators, joint lead managers and joint bookrunners for the issue of preferred sustainable capital securities.In addition, the announcement states that the default distribution of the Preferred Perpetual Capital securities shall be paid semiannually in U.S. dollars on each distribution date, with the first distribution date being January 25, 2020.It is not hard to see that the permanent US dollar bonds of Zhenro Real Estate are mainly institutional investors, which also leads to another important reason for today’s stock price change, which is zhenro’s official reply: “At present, it is understood that the liquidation of investors triggered the accelerated decline of the stock price, but not the actual control of the liquidation of Ou Zongrong, the specific situation is still being understood.Related information is subject to the company announcement.”Investors said that the majority of institutional investors, such as Zhenro, because investors unwinding positions will inevitably lead to price volatility.In response to this, Zhenro real estate investors said that the rumor is not true, will be redeemed as planned.It is worth noting that zhenro issued a “redemption of limited perpetual capital securities” notice on January 4, which stated that “principals and bondholders have been informed”.However, the prospectus of the perpetual debt does not contain a “withdrawal is default” clause.Investors for the sustainable debt worries are justified, is glorious, once in the previous investors said in a meeting, and for a sustainable debt jumped after interest cost is too high, the coupon will have jumped to 15% 10.25%, issuing a statement is made clear that in the control of the change of the trigger event or related debt defaults, unless the issuer shall not withdraw the redemption notice,Or the trustee receives evidence that the event no longer exists 30 days after the event, failing which the current and subsequent distribution rates will be increased by 5% per annum with effect from 30 days after the event.Therefore, the company announced on January 4 that it plans to redeem its perpetual debt of $200 million on March 5.On Jan. 10, it redeemed $100 million in private debt issued by Zhenan Glory, and another $50 million in private debt issued by Zhenan Glory matures in early March.According to Wind data, Zhenro now has 12 US dollar bonds and 14 foreign bonds, including three foreign US dollar bonds maturing within a year, totaling $674 million, with the earliest maturing on April 13, 2022.In terms of sales, the cumulative contract sales amount of Zhenro Real Estate together with the joint venture company and associated companies in 2021 is about 145.643 billion yuan, an increase of about 2.64% compared with the sales amount of 141.9 billion yuan in the same period last year.97% of the annual sales target of 150 billion yuan was achieved.On February 11, Zhenro Real Estate announced that in January 2022, the contract sales amount is 7.897 billion yuan, the contract sales floor area is 491,000 square meters, the contract average price is 16,100 yuan per square meter.On the other hand, Zhenro has been receiving credit lines from banks frequently since late last year.Just Jan. 6, Zhenro Property Holdings Ltd. received a 9.140 billion yuan credit line from Bank of China LTD.Up to now, zhenro Real Estate Holdings has been granted strategic credit of 254.9 billion yuan by financial institutions, of which the total credit from the four major state-owned banks is nearly 24 billion yuan.The frequent actions of financial institutions have also given credit rating agencies confidence in Zhenro’s ability to repay its debts.In connection with this incident, perhaps this year is booming “foreclosure road” has a lot of journey to go.

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