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China's Country Garden Has Warned That It May Default On Its Offshore Loan Obligations

China's Country Garden Has Warned That It May Default On Its Offshore Loan Obligations
With China's Country Garden Holdings , the country's largest private property developer, deals with debt restructuring, it stated it may not be able to satisfy all of its offshore payment obligations when they are due or within the necessary grace periods.
"Such non-payment may lead to relevant creditors of the Group demanding acceleration of payment of the relevant indebtedness owed to them or pursuing enforcement action," the company said in a Hong Kong Stock Exchange filing on Tuesday.
Country Garden stated that the business is currently suffering "significant" uncertainty in disposing of its assets, and that its cash position is under strain.
The developer announced that it had hired Houlihan Lokey, China International Capital Corporation (CICC), and law firm Sidley Austin to review its capital structure and liquidity condition.
Country Garden stock increased 3% in early trade on Tuesday, after losing over 70% of its value since the beginning of the year.
Since a liquidity crisis hit the sector in 2021, companies responsible for 40% of Chinese home sales – largely private property developers – have defaulted on loan obligations, leaving many homes incomplete.
The challenges have gotten worse in the last two years as confidence in the housing and finance markets has dwindled, severely restricting developers' cash.
Country Garden was supposed to pay $66.8 million in coupons on 2024 and 2026 dollar bonds on Monday, but there is a 30-day grace period.
Next week, if the developer fails to pay a $15 million September coupon by Oct. 17, its whole offshore debt might be declared in default.
Country Garden has $10.96 billion in offshore bonds and 42.4 billion yuan ($5.81 billion) in non-yuan loans. If it defaults, these debts must be restructured, and the company or its assets may be liquidated by creditors.
For the nine months ending September, the company achieved contracted sales of roughly 154.98 billion yuan, a decline of about 43.9% and 65.4%, respectively, compared to the similar periods in 2022 and 2021.
Country Garden said it was going to do "its best effort to ensure the delivery of properties, which is the group's most critical corporate responsibility and is the key pillar to safeguard the property market."
China's government has lately implemented a variety of steps, ranging from lowering deposit requirements to lowering existing mortgage rates in select areas, to help revive home buyer confidence and boost the property market.

Christopher J. Mitchell

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