Issuer of India’s Biggest Junk-Bond Gets Nod to Delay $168M Payment

Key Takeaway

• Goswami Infratech secured a payment delay for its $168 million high-yield bond, highlighting risks in emerging market investments.
• Chinese property developers continue to default despite state-backed credit support, questioning the program's effectiveness.
• Strategic Properties failed to secure financing for a $95 million Chicago condo deal, marking its second major deconversion setback.

Goswami Infratech's Payment Delay

Goswami Infratech Pvt., the issuer of India’s largest high-yield rupee corporate bond, has secured a temporary reprieve from creditors on a payment due this month. According to sources familiar with the matter, more than 90% of bondholders have consented to delay the payment, meeting the threshold required to pass the proposal. The bond’s trustee, Axis Trustee Services Ltd., confirmed the consent in a filing on the Bombay Stock Exchange, though details of the requests were not disclosed.

The company had previously indicated it might not be able to pay 14 billion rupees ($168 million) due later this month unless certain terms were met. The proposal to delay the payment to no later than September 30 was sweetened after creditors raised demands. Last year, Goswami Infratech sold India’s biggest high-yield bond, offering an 18.75% yield for 143 billion rupees. Private credit investors, including Cerberus Capital Management LP, Varde Partners LP, and Davidson Kempner Capital Management LP, are among the bondholders.

This situation highlights the broader risks associated with payment delays as global private credit investors increasingly turn to emerging markets. India has been a focal point in Asia, driven by Prime Minister Narendra Modi’s push for more infrastructure investment. Goswami Infratech, part of the Shapoorji Pallonji group under billionaire Shapoor Mistry, has faced liquidity issues after accumulating debt before the pandemic, leading to asset offloading attempts. An external representative for SP Group did not respond to requests for comment.

Chinese Developer Defaults

A series of defaults by Chinese property developers has exposed the limitations of a state-backed credit-support program designed to boost confidence in the country’s struggling property sector. Agile Group Holdings Ltd. recently missed a payment on publicly issued dollar bonds, marking the latest default. Agile is one of over a dozen developers that issued yuan notes guaranteed through a state-backed program launched in 2022 to help cash-strapped developers raise funds in the public market.

The program, backed by China Bond Insurance Co., was initially seen as a turning point, signaling government support for developers. However, recent defaults suggest the program has not alleviated cash strains as effectively as some investors had hoped. At least 13 private developers have issued 36 bonds via the program, raising 35.9 billion yuan ($5 billion). “The bond guarantee program was meant to boost confidence in developers and help them avoid defaults, at least in the public debt market, but it’s a drop in the bucket considering the property market headwinds,” said Ziqi Jiang, chief investment officer of Regent Capital Management Ltd.

Despite its limitations, the program has helped some developers improve liquidity. Recently, Seazen Holdings Co. and New Hope Wuxin Industrial Group Co. raised over 2 billion yuan through bonds backed by the program. While no developer has missed an interest payment on a bond guaranteed by China Bond Insurance, at least six have defaulted or missed payments on other bonds. “Without a visible improvement of contracted sales, we expect continued default of developers, albeit at a slower pace than the past two years,” said Zerlina Zeng, senior credit analyst at Creditsights Singapore LLC.

Strategic Properties' Financing Issues

Strategic Properties of North America has faced another setback in its efforts to deconvert downtown Chicago condominiums. The condo board of 200 North Dearborn Street voted to terminate its agreement to sell the 310-unit Loop building to Strategic for $95 million. This decision follows over two years of failed attempts to secure financing for the deal. This is the second major deconversion failure for Strategic in less than a year, following a similar collapse of a $190 million deal for the 467-unit Ontario Place in River North last July.

The agreement to sell 200 North Dearborn was initially made in July 2022, when interest rates were lower. Strategic had promised to close the sale within five months but struggled to secure the necessary financing. According to a statement circulated among condo owners, Strategic cited "unprecedented disruption in the lending market" as the primary reason for the delays. Despite assurances that financing was forthcoming, the firm failed to provide detailed updates or meet closing deadlines. This lack of transparency and progress led the condo board to vote 3-0 to terminate the deal.