(Yicai) Sept. 25 -- Despite previous debt restructurings, sluggish sales and tight financing conditions are forcing some Chinese real estate developers such as Country Garden Holdings and Sunac China Holdings to seek to further roll over debt.

Country Garden and Sunac China agreed with creditors last year to delay the payment of some bonds then due to this year. They now plan to extend the deadlines once more. R&F Properties, which finished restructuring its onshore and offshore debts in 2022, has delayed the interest payment on over USD4.5 billion of maturing bonds, extending it to next March from this month.

Guangzhou-based R&F is trying to buy time for negotiations with its creditors about a feasible new debt restructuring plan, according to a source in the industry.

An insider at a developer working on a second debt restructuring plan told Yicai that while a plan was agreed previously by all parties, strict implementation would place a significant financial burden on the company. Even if the company still had the capacity to pay the interest and principal on time, it would prefer to negotiate a new plan, the person said.

But while a debt rollover can ease short-term payment pressures, pushing for a new round of debt restructuring or extensions could hinder a firm’s recovery and operational performance because managers would have to spend more time and effort negotiating with creditors, said Liu Shui, enterprise research director at the China Index Academy.

The real estate sector’s ongoing deep readjustment is straining cash flows at developers, and that is one of the main reasons why they want to renegotiate on debt, Liu said, adding that if the property market downturn goes on longer than expected, more debt-ridden builders will be forced to roll over bonds again.

R&F, for example, mentioned in its half-year earnings report that its cash flow prospects have become more uncertain because of poor sales, making it more difficult for the firm to meet its debt repayment obligations.

In the first eight months of the year, the value of sales at China’s top 100 real estate developers plunged nearly 39 percent from a year ago, according to the CIA. Meanwhile, total financing for 65 leading builders tumbled 32 percent in the period, data from China Real Estate Information Corporation showed.

“Looking back, the developers and creditors seemed to be overly optimistic about the future of property market when they agreed on the debt restructuring schemes last year,” said the source at the builder working on its second debt restructuring plan.

“As creditors gain a deeper understanding of the difficulties faced by the mainland real estate market and companies, the terms of new debt restructuring plans are likely to be easier to agree upon,” the person added.

Others are less optimistic. The biggest challenge for firms when discussing debt rollovers is convincing their creditors and potential investors that they still have a future, according to Yu Xiaoyu, research director at EH Consulting.

Most defaulting developers have not acquired land use rights for a long time and are struggling to raise funds, so persuading creditors that they will be able to pay back debts is not an easy thing to do, Yu said. 

Editors: Tang Shihua, Futura Costaglione