Zhongliang Proposes Bond Extension as Three Red Lines Constrains Funding

Zhongliang Holdings is said to have become the latest victim of China’s three red lines policy, as per SCMP. The company is currently under liquidity stress and has given creditors more time to accept an exchange offer on two of its dollar bonds. The bonds in question are its $300mn 8.5% bonds due May 19 and its $450mn 9.5% bonds due July 29. Zhongliang plans to extend the maturities to April 15, 2023 and December 31, 2023 and raise the yields to 8.75% and 9.75% respectively for the two bonds. Creditors holding 90% of the value of the bonds must agree to the exchange offer for it to go ahead.

SCMP notes that Zhongliang is tagged under the ‘yellow’ category of the three red lines, implying that two of the three criteria have been breached. Due to this, Zhongliang has been unable to take out new loans worth more than 10% of its current debts. Zhongliang does not have other offshore bonds outstanding this year but continues to struggle with raising funds. The developer asking for an extension proposal is akin to peers like Zhenro Properties, Guangzhou R&F Properties, Kaisa Group Holdings and Yuzhou Group.

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