(Bloomberg) -- A string of defaults by Chinese property developers has highlighted the limits of a state-backed credit-support program that was meant to boost confidence in the country’s battered property sector.  

The latest such default involves Chinese developer Agile Group Holdings Ltd., which missed a payment on publicly issued dollar bonds for the first time last week. Agile is one of more than a dozen developers that issued yuan notes guaranteed through a state-backed program rolled out in 2022 to help cash-strapped developers raise money in the public market, a challenge for many of them since the onset of the property crisis. 

When it was launched, the credit-support program was seen as a turning point, showing that policymakers’ attention had shifted to ensuring the survival of some developers, rather than focusing only on getting uncompleted housing projects finished. Because China Bond Insurance Co. is state-owned, issuing bonds with its guarantee signaled government support. Recent defaults suggest that the program hasn’t eased some developers’ cash strains as effectively as some investors initially expected.

So far at least 13 private developers have issued a total of 36 bonds via the program, with 35.9 billion yuan ($5 billion) raised, according to data compiled by Bloomberg. 

“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. 

China’s government has struggled to ease pressure on a property sector plagued by record defaults and unfinished projects. Home-price declines accelerated in April, prompting the government to introduce new measures to prop up the sector, including further relaxing mortgage down-payment requirements. The package also included 300 billion yuan in central bank funding to help government-backed firms buy excess inventory from developers. 

Despite its limitations, the program is still helping some of the few surviving developers bolster their liquidity. In the past few days, Seazen Holdings Co. and New Hope Wuxin Industrial Group Co. sold bonds backed by the program, raising a combined total of more than 2 billion yuan.

China Bond Insurance didn’t reply to a request for comment.

While no developer has missed an interest payment on a bond guaranteed by China Bond Insurance, at least six that have issued notes via the program have defaulted or missed payments on other bonds. These developers include CIFI Holdings Group Co., Radiance Holdings Group Co., China SCE Group Holdings Ltd., Country Garden Holdings Co. and KWG Group Holdings Ltd.

Earlier this month, Country Garden paid interest totaling 65.95 million yuan on two yuan bonds that were guaranteed under the program. The coupon payments were made despite Country Garden earlier saying it couldn’t meet initial deadlines and that China Bond Insurance would offer help.

Repayment isn’t a concern given the program’s state backing, but “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.

--With assistance from Jackie Cai and Shuqin Ding.

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