China Builders Can’t Swap and Extend Debt Forever, S&P Warns (1)

Chinese developers’ liquidity stress will evolve into insolvency risk if a property-sales recovery stalls, with at least one-fifth of rated builders facing such prospects, according to S&P Global Ratings.

Developers can’t exchange and extend their defaulted bonds forever, as investors will lose patience if home sales do not soon improve, said a report from analysts including Chang Li. “We assume debt extensions only serve to buy time, and do not fundamentally resolve developers’ excess leverage.”

Amid a record wave of offshore delinquencies, distressed Chinese builders also have been forcing a growing number of debt extensions on investors in a ...