TAIPEI (Taiwan News) — One of China’s largest real estate developers, Sunac Group (融創中國), has sent a letter to government regulators requesting “special policy support” and admitting its cash flow has hit major hurdles — a problem that sparked the Evergrande crisis.
The letter, sent to the city government of Shaoxing in Zhejiang Province on Friday (Sept. 24), said the company faces huge pressure, as housing market sentiments have “fallen to almost freezing point,” according to a Bloomberg report.
The news comes after China’s largest builder, Evergrande, entered uncharted waters on Friday by failing to make a key interest payment on Thursday (Sept. 23), which could seriously impact China's economy and the global financial system.
Sunac poured around US$1.2 billion (NT$33.23 billion) into projects throughout Shaoxing but could only sell one or two houses per week since last month, leading to huge losses, according to the letter. “Sentiment in the housing market has fallen to almost freezing point,” the company said. “We face huge pressure.”
Sunac’s dollar bonds dived to their lowest-ever level as news of the letter spread among investors, per Bloomberg. The company’s representatives refused to comment on the letter, and calls to the Shaoxing city offices went unanswered late on Friday, according to reports.
Despite this news, Sunac still currently complies with at least two out of China’s so-called “Three Red Lines” — limits on excessive borrowing that aim to whip debt-ridden developers into shape by denying them further credit should they cross them.
The limits include a 70% ceiling on liabilities to assets, a 100% cap on net debt to equity, and a cash to short-term borrowing ratio of at least one.
Jenny Zeng (曾錚) from asset management firm AllianceBernstein warned last week that the Evergrande crisis could lead to a “domino effect” among China's other "highly distressed" real estate companies, per a CNBC report.