Country Garden Holdings Co. bondholders will finish voting later Friday on the distressed Chinese developer’s plan to extend payment on a yuan note coming due, a key test as the firm tries to avoid its first default.
(Bloomberg) — Country Garden Holdings Co. bondholders will finish voting later Friday on the distressed Chinese developer’s plan to extend payment on a yuan note coming due, a key test as the firm tries to avoid its first default.
The country’s former largest builder has asked to stretch payment of the 3.9 billion yuan ($535 million) of outstanding principal into 2026. Online voting ends at 10 p.m. Beijing time.
Some noteholders have demanded full repayment by the effective due date of Sept. 4, the first business day following the note’s maturity date two days earlier. The offering document doesn’t say if there are grace periods for the bond. Meanwhile, extra time for Country Garden to pay a combined $22.5 million of dollar-note coupons ends shortly after the yuan bond is due.
A missed payment could impact China’s housing market even more than China Evergrande Group’s late 2021 default as Country Garden has four times as many projects. Country Garden, now the sixth-biggest developer as sales have slumped this year, faces a cash crunch and has as much as $2.9 billion of note obligations the rest of 2023. The firm has warned about “major uncertainties” about bond redemption.
Country Garden didn’t immediately offer a comment when reached Friday.
China’s property sector has worsened anew of late, with July’s decline in new home sales the biggest in a year, Months earlier, the industry returned to growth following the dropping of pandemic-related restrictions. Fresh worries about whether builders have enough money to complete construction of purchased residences has weighed on demand and prices, prompting calls for policy and other support from Beijing as the economy slows. But to date, there has been a lack of broad stimulus.
The uncertainty surrounding Country Garden has sent nearly all of its dollar bonds to below 10 cents and made the firm the worst performer this month in a Bloomberg index of such debt issuers in Asia. The firm’s note due in January was at 78 cents two months ago, according to prices compiled by Bloomberg.
Meanwhile, the builder’s shares have plunged 52% from a July 28 peak, hitting record lows this week.
–With assistance from Emma Dong.
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