Country Garden Holdings Co., the distressed Chinese developer that’s shaken the nation’s financial markets and just posted a record loss, faces a key test of efforts to avoid default as bondholders finish voting on its request to extend repayment.
(Bloomberg) — Country Garden Holdings Co., the distressed Chinese developer that’s shaken the nation’s financial markets and just posted a record loss, faces a key test of efforts to avoid default as bondholders finish voting on its request to extend repayment.
Investors in a note that effectively falls due Sept. 4 have until 10 p.m. in Beijing Thursday to vote. Country Garden, which was previously the nation’s biggest developer, is asking to stretch payment of the 3.9 billion yuan ($535 million) of outstanding principal into 2026. Holders are also voting on a proposal to add a 40-day grace period.
This all marks a crucial phase for Country Garden, which revealed late Wednesday an unprecedented net loss of 48.9 billion yuan in the first half of the year. The builder’s distress has deepened after it missed $22.5 million of dollar-bond coupons earlier this month, dragging the broader Chinese junk dollar debt market to its lowest levels this year. It must must repay within a separate grace period that ends next week to avoid default.
Helmed by one of China’s richest women, Yang Huiyan, the builder’s importance to the broader economy stems from its sheer size. It had the equivalent of about $199 billion of total liabilities at the end of last year, with more than 3,000 housing projects in smaller cities and about 70,000 employees.
That status had given it the firepower to withstand an industry cash crunch that led to record defaults since China Evergrande Group first missed bond payments in 2021. But an industry slump is threatening that streak. Any stumble by Country Garden, now China’s sixth-largest builder by contracted sales, risks worse fallout than from Evergrande given it has quadruple the property projects.
The company in recent days has disclosed a planned asset sale and the issuance of $34 million of stock to pay off money it owes a subsidiary.
Country Garden’s proposals require approval from creditors holding 50% or more in principal, according to a filing to the Shanghai Stock Exchange’s private disclosure platform that was seen by Bloomberg News.
The vote was initially slated to end on Aug. 25, but Country Garden extended it just hours before the deadline, after some investors demanded full repayment by the due date.
China’s private sector developers like Country Garden are grappling with an unprecedented crisis, after a government effort to curtail debt-fueled growth and housing speculation led to cash crunches. Dollar bond defaults the past two years surged to a record. Officials have attempted myriad efforts to stoke demand for the property market — which along with related industries accounts for about 20% of the economy.
Country Garden didn’t immediately offer a comment when reached.
The company’s troubles have intensified the past few months, as it stares down as much as $2.9 billion of note obligations the rest of this year. The builder, whose sales have fallen 35% this year, earlier this month warned about “major uncertainties” about bond redemption.
–With assistance from Emma Dong and Jackie Cai.
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