The Wall Street Journal reported on March 10 that Chinese mainland real estate giant Huaxia Happiness has been in trouble recently, with a series of debt defaults. On Wednesday, Hua Xia Happiness said that the company and its subsidiaries have defaulted on new debts involving principal and interest amounting to RMB8.38 billion due to a phase of liquidity crunch.
As of Tuesday evening, Huaxia Happiness’ accumulated debt defaults involve a total of RMB19.42 billion in principal and interest.
Huaxia Happiness said it is actively negotiating with the financial institutions involved in the company’s debt defaults on extensions and other related matters; and said it will accelerate the formulation of a comprehensive short-, medium- and long-term resolution plan with the support of the local government.
Huaxia Happiness is headquartered in Beijing.
Last Friday (March 5), Huaxia Happiness’ medium-term note “17 Happiness Foundation MTN001” triggered the cross-protection clause, resulting in the bond’s early maturity default.
A few weeks ago, Huaxia Happiness defaulted on its US$530 million bond, which matured on Feb. 28.
Huaxia had said at the Time that it was working on a comprehensive solution to its liquidity problem and planned to determine a mutually agreeable solution after dialogue with all offshore bondholders.
According to the report by Interface News, Huaxia Happiness has issued overseas bonds several times, and currently has a total of 11 remaining offshore bonds with a size of $4.96 billion.
Interface reports that although HHH has formed a debt committee and its chairman Wang Wenhua has released HHH’s commitment to honor its debts through several speeches, the difficulties HHH is facing are still not insignificant, and the successive default statements require HHH to come up with a solution to resolve the risks as soon as possible.
Huaxia Happiness was once ranked among the “Top 10” real estate companies in mainland China, and its debt risks have long been apparent.
As of September 30, Huaxia’s short-term loans and debts due within one year totaled 94.02 billion yuan, up 55.6% from the end of the previous year; long-term loans totaled 65.21 billion yuan, up 33.7% from the end of the previous year; and the balance of bonds payable was 52.545 billion yuan, according to its 2020 third quarterly report. In contrast, the company’s cash on hand at the end of the third quarter last year was 36.68 billion yuan, down about 10% from the end of the previous year.
Huaxia’s debt crisis officially broke out in the Year of the Ox.
On the evening of February 1, HHH took the initiative to release the announcement that some debts were not repaid as scheduled, saying that the company and its subsidiaries had overdue debts involving principal and interest amounting to 5.255 billion yuan, involving bank loans, trust loans and other forms of debt, not involving bonds, debt financing instruments and other products. The announcement at that time showed that from the fourth quarter of 2020 to January this year, the company was due to repay financing principal and interest amounting to 55.9 billion yuan, and the net cash flow of financing after excluding the support of major shareholders – 37.1 billion yuan, and the company’s liquidity was staged to be tight, resulting in the situation that some debts were not repaid as scheduled.
Huaxia’s credit rating has been downgraded to junk status, and it is a very low grade junk rating.
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