How bad is Country Garden’s financial situation?
Country Garden’s total liabilities were about US$194 billion by the end of June, unchanged from the end of 2022, based on its first-half financial results.
It faces 108.7 billion yuan (US$14.9 billion) worth of debts due within 12 months, while its cash levels are around 101.1 billion yuan.
The company’s liquidity stresses became public early last month after it missed two dollar coupon payments. It also has been talking with its onshore creditors to extend a 3.9 billion yuan private bond due on Saturday.
Country Garden also has dollar coupon payments on its other offshore bonds coming due each month for the rest of 2023. And it has onshore bond payments totaling 12.6 billion yuan by the end of the year, according to CreditSights.
Will Beijing bail out Country Garden and what is the outlook for the developer?
Beijing has so far not directly bailed out any private Chinese developer despite some of them coming to the brink of collapse since the property crisis hit the economy in 2021, after a regulatory crackdown on developers’ accumulation of debts.
In the case of Evergrande, however, the provincial government of the southern province of Guangdong, where the developer is based, did step in to help manage the fallout from its destabilising financial crisis in late 2021.
For now, the Chinese authorities are scrambling to introduce a string of measures, including mortgage rate cuts and an easing of home purchase restrictions, to revive the property market and prop up the sputtering economy.
However, the outlook for Country Garden is worsening.
Moody’s slashed its credit ratings for the company by three notches to Ca from Caa1 on Thursday due to worries it could be on the brink of default. It said Country Garden was facing tight liquidity and recovery prospects for bondholders could be weak.
Country Garden itself also warned on Wednesday of default risks if its financial performance continues to deteriorate, and said it “felt deeply remorseful” for its record loss in the first half.