China property crisis: troubled Country Garden fights to avert default as US$15 million offshore debt deadline looms
Troubled Chinese developer Country Garden Holdings is fighting to avert its first ever actual default on an offshore debt as the grace period for a US$15.4 million payment enters its final hours.
The company, once largest Chinese home builder by sales, missed an initial deadline for the dollar-bond coupon payment last month, triggering a 30-day grace period that ends between October 17 and 18 as the missed payment fell on a Sunday. The exact time of the deadline has not been revealed.
Country Garden warned it would not be able to service all of its offshore borrowings on time a week ago.
It did not immediately reply when the Post reached out on Tuesday.
The admission of possible default in a statement last week signalled the start of efforts by the Chinese property giant to restructure some of its US$16.5 billion of offshore debts.
The Foshan-based company has hired China International Capital Corp and Houlihan Lokey as its joint financial advisers, and Sidley Austin as its legal adviser, to evaluate its capital structure and liquidity, the statement said.
Country Garden has missed payment deadlines on bond coupons in recent months amid gloomy home sales nationwide, joining the ranks of victims of Beijing’s “three red lines” policy, which was introduced in August 2020 to reduce developers’ leverage in what was then a red hot property market.
Helmed by China’s third richest woman Yang Huiyan with US$8.2 billion fortune according to Forbes, Country Garden was the nation’s biggest homebuider before nationwide sales plunged in 2021.
Country Garden’s contracted home sales fell to 6.17 billion yuan in September of this year, the company said in an exchange filing, from about 8 billion yuan in August. That compared with 32 billion yuan recorded in September of 2022, depriving the developer of a crucial source of cash flow.
The builder had 257.9 billion yuan (US$35.26 billion) of interest-bearing debt as of June 30 this year, with 603.6 billion yuan worth of unfinished homes due to be delivered to buyers, according to its latest interim report.
Its co-founder, Yeung Kwok-keung or Yang Guoqiang in Mandarin, recently showed up in public during a site inspection in Guangdong’s Shunde city, where he urged workers to ensure construction quality, according to a statement issued by the company last Friday.
With its estimated 118.5 billion yuan of non-yuan debt, a default by Country Garden would mark one of the largest offshore debt restructurings among Chinese developers.
The latest fallout at Country Garden comes as one of its major rivals, the heavily indebted China Evergrande Group, lurches from crisis to crisis, the latest being the “arrest” of its chairman and founder Hui Ka-yan, and investigations into the financial affairs of its main onshore unit, Hengda Real Estate.
Evergrande will discuss a proposal to delay repayment of an onshore bond coupon due October 19 by one year at a meeting with bondholders scheduled for Wednesday and Thursday of this week, according to a statement issued Hengda Real Estate late on Monday.
