Heavily indebted company becomes latest casualty of China’s property crisis
Country Garden has missed its final deadline for the coupon payment on a dollar bond, according to three creditors, making what was once China’s biggest developer by sales the latest casualty of the country’s property sector crisis.
Bondholders told the Financial Times that they had not received an interest payment due at midnight US Eastern time on Tuesday for a $500mn Country Garden bond maturing in September 2025. The developer was due to make a $15.4mn coupon repayment this week.
Country Garden declined to comment on the specific coupon payment. A spokesperson reiterated on Wednesday that it “will not be able to meet all of its overseas debt repayment obligations”.
Country Garden, the largest developer in China by sales from 2017 to 2021, has been battling to stave off default for weeks.
China’s property slowdown, which accelerated following the 2021 default of Evergrande, has humbled the country’s private developers and dragged on economic growth.
There have been severe construction delays, a sharp fall in housing transactions and a wider loss of confidence in the sector, which generates more than a quarter of China’s economic activity and is the most important source of household wealth.
China’s economy beat market expectations to grow 4.9 per cent year on year in the third quarter, official data showed on Wednesday, but the housing market remains under pressure. Property investment in the first nine months of the year contracted by 9.1 per cent.
Country Garden was until recently seen as more financially stable than many of its peers. Several state banks last year unveiled new credit lines to companies including Country Garden as part of government support for the property market. But Country Garden’s sales kept falling.
The company’s shares have become a penny stock after falling about 70 per cent this year, while its bonds are trading at 5 cents on the dollar.
Beijing, which initially added to funding pressures on developers in 2020 when it unveiled curbs on leverage, has stopped short of any major bailouts and instead emphasised the need to complete unfinished projects.
While developers have typically defaulted on their offshore bonds, the status of their mainland bonds is unclear.
In August, missed payments from Zhongrong, a Chinese shadow bank that lent money to developers, fuelled fears of spillover effects from the property sector to the wider economy.
Country Garden has international debts worth $11bn and total liabilities of about $200bn as of the end of June. That compares with about $20bn and $340bn, respectively, at Evergrande.
Evergrande, the world’s most indebted developer, faces a winding up hearing in Hong Kong at the end of the month. Its restructuring plan, two years in the making, was derailed in September after the company cited an unspecified “investigation”.
Advisers to international bondholders have warned that the “base case” is a liquidation of the group, which has hundreds of projects across China, if a deal is not reached.
