People pass by the Country Garden Community in Fuyang, China on Sept. 3, 2023.
Future Publishing | Future Publishing | Getty Images
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, or $540 million, onshore private bond in a vote that ended on Friday night.
An unprecedented liquidity crisis in China’s vast property sector is a major risk to a sputtering post-Covid 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% of participating Country Garden onshore creditors approved the extension, 43.64% opposed and 0.28% 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 authorized 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-fueled building boom.
As Country Garden’s financial woes spiraled 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.
Until this year Country Garden was the largest Chinese developer by sales. The company was considered financially sound compared with peers like China Evergrande Group, which defaulted on its debt in 2021.
While Country Garden’s liabilities are only 59% of Evergrande’s, it has 3,103 projects across China, compared with around 800 for Evergrande — making the company matter to systemic stability.
A default by Country Garden would have exacerbated the real estate crisis and put more strain on its onshore lenders.
The developer’s financial woes became public last month after it missed two dollar-coupon payments totalling $22.5 million, raising fears that the country’s deepening property debt crisis would spill over to the broader financial sector.
Country Garden still faces another major challenge next week, when the grace period ends for last month’s missed coupon payments worth a total of $22.5 million on the two offshore dollar bonds.
The developer 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.
Moody’s slashed Country Garden’s credit rating by three notches to Ca from Caa1 on Thursday due to worries it could be on the brink of default. It said the firm was facing tight liquidity and recovery prospects for bondholders could be weak.
Country Garden warned on Wednesday of default risks if its financial performance continued to deteriorate, and said it “felt deeply remorseful” for its record loss in the first half.
Nicky Henderson says ‘sorry they’re not turning up’ after raft of non-runners
Cathay Pacific Marks 35 Years of Cadet Pilot Training and Graduates First Integrated Programme
LAURA INGRAHAM: Harvard, UPenn and MIT’s presidents thought their titles and prestige would protect them
Florida man accused of threatening to carry out mass shooting in NYC
‘Protecting Earth is religious duty’: UAE mosques urge faithful to go green during Friday sermon
Moment burned volcano survivors plead for help after getting caught in deadly eruption that claimed 11 lives and left 12 others missing
Introducing SELF’s Diet Culture Detox Course!
Look: Sheikh Mohamed, Kamala Harris discuss bilateral relations,regional developments at COP28
Score a free footlong chocolate chip cookie at Subway in NYC on National Cookie Day
House could have articles of impeachment against Biden ready in first half of 2024
South Korea plunging deeper into sub export markets
Former NFL TE accidentally ‘devalued’ an important piece of Tom Brady memorabilia
The roots and depths of Israel’s Hamas intel failure
Jaylen Brown’s ejection adds drama, but Celtics beat Knicks: 8 takeaways
Ryan O’Neal Through the Years: The ‘Love Story’ Star’s Life in Photos
News20 hours ago
Hunter Biden: Read the indictment against president’s son in full
Investing19 hours ago
Here are Friday’s biggest analyst calls: Apple, Tesla, Boeing, First Solar, Qorvo, Exxon, Meta, O’Reilly & more
News20 hours ago
U.S. issues strongest criticism of Israel yet as civilian deaths in Gaza surge
News23 hours ago
GOP’s Brutal Math: Trump Could Secure Nomination Before Conviction
Auto15 hours ago
The Tesla Cybertruck Has Strong Sales Potential, But Only If US Buyers Step Up
News24 hours ago
Dozens of Palestinians are captured by IDF, stripped and paraded around Gaza
Travel20 hours ago
Local Vibes Come to a Regenerated Area of Aruba
News23 hours ago
Taiwan says Chinese balloon spotted over Taiwan Strait ahead of crucial election