(Yicai Global) Nov. 9 -- Shares in Jiangsu Zhongnan Construction Group surged by the exchange-imposed limit today after the private Chinese real estate developer said that a subsidiary will stop making interest repayments on a USD250 million senior note.

Zhongnan's share price [SHE:000961] jumped 10 percent to CNY2.32 (USD0.32), giving it a market capitalization of CNY8.8 billion (USD1.2 billion). Yesterday the stock edged up 0.48 percent.

Haimen Zhongnan Investment Development International will pause interest payments on a USD250 million note, which has a coupon rate of 11.5 percent and is due April 2024, the Shanghai-based parent firm said on Nov. 7.

There is still USD240 million, or 4.3 percent of Zhongnan’s net assets, outstanding on the bond, which was issued in April last year, it said. The company will enter into negotiations with creditors as soon as possible, it added.

Zhongnan has three US dollar bonds, including the one held by its unit, worth USD432 million and six onshore bonds worth CNY6.1 billion (USD842.5 million) that will be due in the next one to three years.

The developer has been dragged down along with the rest of the real estate sector. Zhongnan posted losses of CNY2 billion (USD276.2 million) in the first three quarters, compared with profit of CNY2.8 billion a year ago. Sales tumbled 69 percent over the period to just CNY4.8 billion.

The firm, which is one of the country’s top 30 developers, owed CNY296.9 billion (USD41 billion) as of the end of September, with assets of CNY337.3 billion, giving it an asset-liability ratio of 88 percent. It has regularly been repaying commercial bills late.

But Zhongnan is still luckier than many of its peers. In August it was thrown a CNY2 billion (USD276.3 million) lifeline by a distressed asset management company to be used for the restructuring of its debt and resuming stalled construction projects. And in May, China Huarong Asset Management and several Jiangsu province-based state-owned entities formed a CNY5 billion fund to help it finish its housing projects on time.

Editor: Kim Taylor