HONG KONG: & nbsp, Country Garden issued a warning on Tuesday, October 10, about its inability to fulfill its debt obligations to foreign creditors, potentially joining the growing list of Chinese developers who have filed for bankruptcy and paving the way for one of the nation’s largest debt restructurings.
Since a liquidity crisis hit the industry in 2021, 40 % of Chinese home sales — mostly those of private property developers — have defaulted on debt obligations, leaving many unfinished homes.
The largest private estate developer in China, Country Garden, hasn’t defaulted yet, but it has missed coupon payments on a few dollars bonds since last month, and next week’s payment deadline is approaching.
Country Garden claimed in a registration with the Hong Kong stock exchange on Tuesday that it was experiencing” major problems” in terms of sales and financing, and that the amount of money it had on hand had been steadily declining.
Non-payment may result in debts demanding payment acceleration or taking legal action, according to the company, which stated that it would” not be able to fulfill all of its offshore payment responsibility when credited or within the appropriate grace periods.”
The notice from Country Garden highlights how the Chinese real estate market, which accounts for about 25 % of the country’s economy, is experiencing an unparalleled cash squeeze, and how prospects for developers are continuing to be bleak.
To boost homebuyers’ trust, Beijing has implemented a number of measures in recent months, such as lowering loan requirements and cutting current mortgage rates. However, it was unlikely that the growing debt problems of developers would be able to accomplish this goal.
Country Garden, which owns 42.7 billion yuan( US$ 5.86 billion ) worth of offshore loans and US$ 10.96 billion in offshore bonds, stated that it was dealing with” significant” uncertainty about the disposition of assets and that its cash position was still under pressure.
The developer claimed that in order to examine its capital structure and liquidity position and develop a comprehensive solution, it had appointed Houlihan Lokey, China International Capital Corporation( CICC ), and law firm Sidley Austin as advisers.
The business added that it will collaborate with advisors to create the most practical and effective solution for all parties involved and urged the debts to be patient.
According to Morningstar researcher Jeff Zhang, mandating advisers” may determine whether the company defaults in the next two weeks depending on the results of international debt restructuring.”
” As consumers and financial institutions may continue to play a side role, we do not anticipate Country Garden’s cash to significantly increase.”
BIG LOOMS FOR THE Check
A government-led assault on a debt-fueled building boom led to China’s most recent property sector slump, which began in 2021. It has intensified as economic growth slowed and trust in the cover and investment markets dried up, more limiting the cash of designers.
Despite a 30-day grace period, Country Garden was required to pay US$ 66.8 million in discounts on 2024 and 2026 money ties on Monday. The engineer has no stated whether or not those payments were made.
Without providing any additional information, the programmer stated in its filing on Tuesday that it did not make a primary repayment of HK$ 470 million( US$ 60.04 million ) on some bills.
If Country Garden doesn’t pay a US$ 15 million September coupon by Oct. 17 at the end of the 30-day grace period, its whole offshore debt may get deemed in default, which will put it to the ultimate test second week.
However, the processing stated that it has received inland bondholder authorization for the improvement of nine set of bonds with a 14.7 billion yuan ( US$ 2.02 billion ) exceptional principal price.
It added that the extension had given it” the time and space to focus on the restoration of its business activities.”