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A New Test For China's Real Estate Giant Country Garden For Onshore Bond Extensions

A New Test For China's Real Estate Giant Country Garden For Onshore Bond Extensions
After avoiding default at the last minute twice this month to provide some relief to the crisis-hit Chinese real estate market, embattled developer Country Garden will face a new round of voting by creditors on Monday to extend multiple loan deadlines.
Onshore creditors will vote on whether to approve Country Garden's application to postpone the repayment of eight onshore bonds by three years until Monday at 10 p.m. Hong Kong time.
The most recent voting comes after the largest private developer in the nation on September 1 received clearance from creditors to postpone payments for a 3.9 billion yuan ($533 million) onshore private bond for three years.
After a two-time delay, Country Garden's proposal was approved by 56.08% of the voting creditors.
With a last-minute coupon payment for the bond last week, it also avoided default in the offshore market.
The requests to postpone the maturity dates of eight onshore notes that were issued by the developer and a subsidiary and were scheduled to mature and be puttable in 2023 and 2024 will be put to the separate votes of Country Garden's bondholders on Monday.
There were no comments on the issue available from Country Garden.
As revenues fell, Country Garden—one of the few significant Chinese developers that have not defaulted on debt obligations—faced liquidity strain and had less money available, according to its interim financial filings.
According to the company's interim financial statement, it has debts of 108.7 billion yuan ($14.9 billion) that are due within a year, while its cash position was approximately 101.1 billion yuan as of the end of June.
Country Garden has at least five coupon payments due this month in the offshore market, including two quite substantial dollar bond coupons worth $15 million due on September 17 and $40 million due on September 27. These coupons have a 30-day grace period on each.
Any failure by Country Garden would worsen the nation's escalating real estate problem, put further stress on its already troubled banks, and might delay not only the recovery of the real estate market but also the recovery of the wider Chinese economy.
According to Nicholas Chen, a Singapore-based analyst at the research firm CreditSights, Country Garden has so far demonstrated "higher willingness to stave off a default" in comparison to many of its rivals.
Given its weak cash position, Chen anticipates Country Garden to continue attempting to postpone due bond payments on both domestic and international markets.
He added that although the precise nature of the action was unclear, Chinese regulators were probably involved with the developer because of the "potential contagion risk to other upstream and downstream sectors, as well as the various local governments".

Christopher J. Mitchell

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