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Chinese Real Estate Developer Aoyuan Announced USD Bond Default

Well-known Chinese news site Sina (NASDAQ: SINA) recently reported that China’s Aoyuan Group, the 25th largest real estate developer in China, announced in advance that it will default on its U.S. dollar based bonds. It will not pay the interest in the next few years for its over US$1 billion U.S. Dollar debts. The announcement somewhat caught the market and investors by surprise. Not only did it not initiate any tender offer for the dollar bonds due this week, but it also announced a default before the expiration date. This practice is obviously different from other real estate companies. After the official announcement of default, Aoyuan will enter the stage of debt restructuring. In its announcement, Aoyuan stated that it is working with advisors (including legal, financial and other advisors) to evaluate its capital structure and liquidity and to conduct due diligence. In terms of operations, affected by the tight liquidity, the performance of Aoyuan has continued to be sluggish. Aoyuan said that the continued downturn in the market has dampened consumer confidence and made it difficult for the Group to realize inventories and sell assets on reasonable terms. The company pointed out that the management team of the group, including the senior management, remains stable and is committed to improving the firm’s operations.

Source: Sina, January 20, 2022