A man in a white shirt sits in a meeting room.

China’s third-largest developer just defaulted – and the worst may be yet to come

About a year ago, Chinese billionaire Sun Hongbin was certain that his luxury real estate company Sunac China would never “bomb”.

Last week, his company – China’s third-largest developer – defaulted, missing the coupon payment deadline on a $742 million ($1.1 billion) offshore bond.

Unlike Evergrande, which defaulted in December last yearSunac appeared to be in good financial shape and the boss, Mr. Sun, had previously been diligent in repaying his debts.

He even paid off some of the company’s debt out of his own pocket, Chinese media reported.

Betty Wang, senior China economist at ANZ Research, said Sunac’s default was “another blow to the fragile property sector”.

“The shock to market confidence, particularly in the private sector segment, has been quite significant,” she told the ABC.

“There are a lot of downside risks in the economy.”

A “white knight” in trouble

An advertisement for property developer Sunac China Holdings is seen in a residential complex in Shanghai, China.(Reuters)

While the Hong Kong-listed company apologized for the default, it said it could miss more deadlines in the coming year.

The company also asked creditors to give it “time to work through challenges” while it works “to expedite sales and payment collection, dispose of assets, seek debt extension and to introduce strategic investors”.

A man in a navy blue suit standing.
Sun Hongbin is one of the richest men in China.(Provided)

Mr. Sun is widely known as a “white knight” in China’s property market, who has actively acquired assets from competitors over the past five years as the property market cooled.

He made it to the list of China’s 200 richest people at the age of 40. In 2016, at the age of 53, his company became one of the top 10 developers in China through rapid business expansion.

Today, Sunac is one of China’s most indebted developers, with $7.7 billion ($11 billion) in US dollar obligations.

After Beijing implemented the “three red lines– in an effort to reduce debt within the industry, curb runaway house prices and raise building standards – a wave of defaults has hit the sector.

China’s biggest developer, Evergrande, is reeling from more than $400 billion in debt.

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