A state-engineered rescue of Country Garden would be one of the most significant interventions to date by authorities to support the cash-squeezed and highly indebted property sector, which accounts for a quarter of China’s economy.
The two sources, who have no information on the bailout talks, said some Country Garden bondholders do not expect a higher recovery rate on their investments even if such a deal were to eventuate.
ADVISERS BEGIN DUE DILIGENCE
Offshore bondholders sought urgent talks with Country Garden after it did not pay the US$15 million coupon on Oct 18 – the end of a 30-day grace period, sources with direct knowledge of the matter have said.
CreditSights said in a Nov 2 research note that Country Garden had “formally defaulted” on its offshore bonds due to the missed payment.
The company has been privately communicating with some bondholders about its efforts to formulate a debt repayment plan since then, the sources said.
Country Garden said on Oct 10 that it had appointed CICC, Houlihan Lokey, and law firm Sidley Austin as advisers to examine its capital structure and liquidity position and formulate a “holistic” solution to repay its offshore debt.
CICC did not immediately respond to Reuters’ queries. Houlihan and Sidley Austin declined to comment.
The advisers have begun due diligence on Country Garden’s financial condition, including looking at cash flow for onshore projects, said the two sources and a separate source familiar with the matter.
As yet, few Chinese property developers have reached agreements on debt repayment plans.
Sunac China Holdings Ltd in October became the first to complete the debt revamp scheme for its US$9 billion offshore debt after winning approval from creditors and courts.
Bigger rival China Evergrande, however, saw its initial US$23 billion offshore debt restructuring plan thrown off course in September after Chinese authorities launched an investigation into its billionaire founder Hui Ka Yan and a flagship unit.