Embattled Developer Country Garden Seeks Approval to Extend Debt Repayments
HONG KONG, Sept 11 (Reuters) – Country Garden, a Chinese property developer, is facing a crucial round of voting by creditors to extend several debt maturities. The voting, scheduled to conclude on Monday, will determine whether Country Garden’s proposal to extend repayments of eight onshore bonds by three years will be approved. This comes after the developer narrowly avoided default on two separate occasions this month, providing some relief to the crisis-stricken Chinese property sector.
The recent voting follows the approval granted by creditors on Sept. 1 for Country Garden’s request to extend payments by three years for a 3.9 billion yuan ($533 million) onshore private bond. The voting for this bond was postponed twice before finally receiving support from 56.08% of participating creditors. Country Garden also managed to avoid default in the offshore market by making a last-minute bond coupon payment.
On Monday, bondholders of Country Garden will vote separately on proposals to extend the maturities of eight onshore bonds, issued by the developer and its subsidiary, which were originally set to mature in 2023 and 2024. The outcome of this voting process will have significant implications for Country Garden’s financial stability.
With shrinking sales and reduced available funds, Country Garden, one of the few large Chinese developers that have not defaulted on debt obligations, has been facing liquidity pressure. According to the company’s interim financial statement, it currently faces 108.7 billion yuan ($14.9 billion) worth of debts due within the next 12 months, while its cash level is around 101.1 billion yuan as of the end of June.
In the offshore market, Country Garden has multiple coupon payments due this month, including two sizable dollar bond coupons worth $15 million and $40 million, with respective grace periods of 30 days. Any default by Country Garden would worsen the ongoing real estate crisis in China, strain the banking system further, and potentially delay the overall recovery of the Chinese economy.
Despite the challenges, Country Garden has demonstrated a higher willingness to avoid default compared to its peers, according to Nicholas Chen, an analyst at research firm CreditSights. Chen expects the company to continue seeking deferment of bond payments in both onshore and offshore markets due to its inadequate liquidity position.
It is speculated that Chinese regulators may be involved in addressing Country Garden’s situation to prevent potential contagion risks to other sectors and local governments. However, the specific intervention remains unknown.
The outcome of the voting process and the subsequent actions taken by Country Garden will be closely monitored, as it could have far-reaching implications for the troubled Chinese property sector.
($1 = 7.3490 Chinese yuan renminbi)
Reporting by Xie Yu; Editing by Sumeet Chatterjee and Lincoln Feast.