(Yicai Global) July 18 -- Shares in Sino-Ocean Group Holding plunged today after the Chinese state-owned real estate company, which has not defaulted on its debt in the past two years, said it is unable to repay the principal and interest on CNY2 billion (USD278.8 million) worth of bonds that will mature next month.

Sino-Ocean’s stock price [HKG:3377] closed down 9.2 percent at HKD0.39 (USD0.05).

Sino-Ocean has insufficient available funds to pay the principal and interest of its five-year ‘18 SOG 01’ bonds, which have a coupon rate of 4 percent and are due on Aug. 2, and there remain significant uncertainties as to when these will be repaid, the Beijing-based company said today.

Sino-Ocean intends to negotiate with bond holders to adjust the repayment timetable, it said. To safeguard the interests of investors, the trading of the bonds has been suspended from today, it added. The prices of some of its bonds have fallen below CNY30 (USD4.18).

Sino-Ocean has been experiencing lower-than-expected sales and difficulties in refinancing since 2022, it said. The developer logged losses of CNY15.7 billion (USD2.2 billion) last year, its first deficit in nearly five years. And its gross profit margin contracted to a record low of 5.15 percent, down from 22.5 percent in 2021.

The firm does not have enough cash to even cover its short-term debt. Sino-Ocean’s money in the bank shrank 65.3 percent at the end of last year from a year earlier to CNY9.4 billion (USD1.3 billion).

The company is making every effort to raise funds and to improve liquidity by accelerating asset disposal and cash collection, Sino-Ocean said. It will continue to hold discussions with bond holders and will convene a meeting with investors to negotiate a debt repayment plan, so as to protect their legitimate rights and interests.

Editor: Kim Taylor