Is this the start of the 2022 GFC? Another Chinese developer is sinking

PHOTO: Kaisa Group Holdings Ltd

(Bloomberg) — Investors have a new worry in China’s battered real estate sector.

Kaisa Group Holdings Ltd. shares plunged a record 18% in Hong Kong after two credit assessors downgraded the Shenzhen-based developer and said it may struggle to refinance dollar debt. The company’s 6.5% bond due Dec. 7 fell 5.9 cents to 52.1 cents on the dollar, poised for a record low, amid a broad selloff in debt issued by Chinese developers.

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The firm is the latest to come under pressure as a spike in borrowing costs crushes property firms with the worst balance sheets. Spreads on Chinese high-yield debt over comparable Treasuries have widened to near record levels after a brief respite last week, making refinancing upcoming maturities prohibitively expensive. At least four Chinese developers have defaulted in October.

S&P Global Ratings and Fitch Ratings cut Shenzhen-based Kaisa by two notches on to CCC+ from B on Wednesday, following a Moody’s Investors Service downgrade last week. China Evergrande Group, which has the largest liabilities of any property firm worldwide at about $300 billion, is due to pay an overdue coupon on Friday.

Kaisa has a $400 million note due on Dec. 7, and $2.8 billion of dollar bonds maturing in 2022, according to data compiled by Bloomberg. That’s on top of about $1.1 billion of interest payments for next year. While Evergrande hasn’t tapped the dollar bond market since early last year, Kaisa sold $2.4 billion of the notes in 2021.