Beijing (Credit: Nikolaj Potanin via Flickr)
Chinese developer Zhonghong Holdings has defaulted on more than $174 million debt, just one year after the company tried to buy a $4 billion senior living facility chain.
This latest default means that Zhonghong has RMB 2.3 billion ($364 million) in total overdue debt, which amounts to 23 percent of the company’s net assets, according to Mingtiandi, a website that tracks real estate news related to Asia. The default comes just one year after the company came close to buying New York-listed Brookdale Senior Living for $4 billion. The deal reportedly fell through when Chinese regulators cut off the firm’s access to more credit.
The default also follows Zhonghong’s purchase of a 21 percent stake in SeaWorld Entertainment from Blackstone Group for $449 million. It also comes a few months after Chinese prosecutors froze Wang Yonghong’s controlling stake in the company after units of Zhonghong Group defaulted on various loans.
Moody’s Investors Service issued a statement on Monday warning that the residential market for small and mid-sized developers in China is going to become tougher due to domestic credit conditions.
“The tightening credit environment will accelerate market consolidation by driving smaller and weaker developers out of business or forcing them to sell their property projects to developers with strong liquidity,” Kaven Tsang, a Moody’s vice president and senior credit officer, said in a statement. [Mingtiandi] — Kathryn Brenzel
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