BEJING: Country Garden has won approval from its creditors to extend payments for an onshore private bond, according to sources and a document seen by Reuters, in a major relief for the embattled Chinese developer as well as the crisis-hit property sector.
Country Garden was seeking approval from its creditors to extend the maturity on a 3.9 billion yuan (US$540 million) onshore private bond in a vote that ended on Friday (Sep 1) night.
An unprecedented liquidity crisis in China’s vast property sector is a major risk to a sputtering post COVID-19 recovery in the world’s second-biggest economy, which has rattled global markets.
Country Garden debt payment extension buys time for China’s largest private developer to avoid default, and is good news for financial markets and the Chinese government, which has announced a raft of measures to support the property sector.
The extension means the developer can repay the debt in instalments over three years, instead of meeting its obligations by Saturday. The bond is not publicly traded.
In Friday’s vote, 56.08 per cent of participating Country Garden onshore creditors approved the extension, 43.64 per cent opposed and 0.28 per cent abstained, an official document shared with bondholders showed.
Country Garden did not immediately respond to a request for comment. The sources, who have direct knowledge of the matter, asked not to be named as they were not authorised to speak to the media.
China’s property sector, which accounts for roughly a quarter of the economy, has lurched from one crisis to another since 2021 after the authorities cracked down on developers’ debt-fuelled building boom.
As Country Garden’s financial woes spiralled over the past month, Beijing has rolled out a string of support measures including cutting mortgage rates and removing some curbs on home purchases.
The authorities are set to take further action, including relaxing home-purchase restrictions as they scramble to tackle a deepening crisis in its massive debt-riddled property sector, Reuters reported on Friday.
Country Garden’s reprieve may give onshore bondholders some relief, but there is still a long way to go as China tries to defuse risks in the crisis-hit property sector and bolster the economy, analysts said.
“Sales in the biggest cities in China may see meaningful improvement over the next couple of months as Beijing cuts mortgage rates and makes them more easily available to buyers,” said Guotai Junan International’s chief economist Zhou Hao.
“However, how the improvement will trickle down to help the cash flow of developers remains to be seen. Plus different types of developers are likely to benefit from it very unevenly. Those with more projects in the first-tier cities may benefit first.”
The slump in the Chinese property market is driven by more fundamental factors than the cost of borrowing, including broader debt worries in the economy, white-collar workers taking pay cuts and a demographic downturn, analysts say.