Country Garden bondholders meet Shenzhen Exchange over payment
CHINA’S Shenzhen Stock Exchange met with some holders of Country Garden Holdings’ credit default swap-linked yuan bond to seek feedback on repayment, including possibly not exercising their put option, according to people familiar with the matter.
Some of the bondholders have already registered their put option, effective Dec 13, to seek early repayment, the people said, asking not to be identified as the matter is private.
But if the holders agree to not exercise the option, the expiration of their CDS tied to the bond – which is similar to insurance for investors against non-payment – would be extended until the bond’s December 2024 maturity, the people said.
The in-person meeting on Thursday at the exchange’s office is the latest sign of the Chinese developer’s struggle to meet its debt obligations amid cratering property prices.
It is likely to also raise questions about how fully investors can cash in on their investment of Chinese developers’ CDS products, which commonly accompanied newly issued bonds as a package, a trend that largely started in the last year.
The bond, which has US$112 billion outstanding, was issued by Country Garden Real Estate Group a year ago under China’s push to beef up financing support for the real estate sector.
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The Shenzhen Stock Exchange hosted the meeting because the bond is listed on the bourse. Two state-owned firms issued and sold CDS to investors simultaneously when the bond was issued, the people said.
The CDS, which was valid for a year, is set to expire next week, along with the put-option effective date, the people said.
Country Garden is China’s biggest private developer and its debt struggles have epitomised the property crisis which is engulfing the country’s economy.
The company was deemed to be in default on a dollar bond in October.
Neither the bourse nor Country Garden replied immediately to a request for comment. BLOOMBERG.
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