Major Chinese developer avoids default

Major Chinese developer avoids default

Country Garden wins creditors’ approval for deadline extension but more challenges loom

A residential complex built by the  Chinese developer Country Garden is seen in Nanjing, in Jiangsu province. (Photo: AFP)
A residential complex built by the Chinese developer Country Garden is seen in Nanjing, in Jiangsu province. (Photo: AFP)

BEIJING: The Chinese developer Country Garden has won approval from creditors to extend a deadline for a key bond repayment, narrowly avoiding a potential default.

The agreement brings some respite amid a liquidity crisis that has shaken the country’s financial markets.

Country Garden received sufficient support in a vote that ended late Friday to stretch payments on the 3.9 billion yuan ($537 million) in outstanding principal into 2026, according to filings to the Shanghai Stock Exchange.

The bond had a maturity date of Sept 2, which meant that the payment effectively would be due on Monday, the next business day.

The company also won approval to add a grace period of 40 calendar days.

As China’s broader property debt crisis heads into its fourth year, the challenges are far from over for Country Garden, formerly the country’s biggest developer. More debt deadlines loom for the builder that has about $187 billion in total liabilities.

It must pay a combined $22.5 million in two dollar note coupons within a grace period that ends on Sept 5-6 or risk default. Markets were jolted when it missed the initial deadline for those payments last month, with Chinese junk dollar bonds — largely issued by builders — falling to their lowest levels this year.

Headed by one of China’s richest women, Yang Huiyan, Country Garden is important to the Chinese economy based on its sheer size, with more than 3,000 housing projects in smaller cities and about 70,000 employees.

That status had given Country Garden 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 four times the number of property projects.

Country Garden recently reported an unprecedented net loss of 48.9 billion yuan for the first half of the year and warned of a possible default.

“The shrinkage of the property sector, coupled with the not yet restored confidence of the capital market, exerted mounting pressure on the company’s business operation,” it said on Wednesday.

Chins’s economic rise has in part been fuelled by property and construction, which account for more than 20% of gross domestic product. In recent years, however, authorities have stepped in to curtail risky debt-fuelled growth and housing speculation, leading to a cash crunch in the industry.

Officials are now trying to stoke demand for the property market to help get developers back on their feet. In recent days, authorities announced fresh stimulus for the beleaguered sector, including lower minimum down-payments for homebuyers.

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