Country Garden faces US$2.9 billion payment amid liquidity crunch
COUNTRY Garden Holdings faces US$2.9 billion in debt payments for the rest of the year, with the Chinese developer’s liquidity woes testing its ability to meet deadlines and avoid a first-ever default.
Worries that the developer may miss payments – with debt obligations due each month through December – have sent its bonds tumbling in recent weeks. While the firm told some creditors that it has remitted funds for its 4.5 per cent yuan bond due Aug 1, broader financing woes and poor earnings will continue to raise questions about the firm’s ability to stay afloat. IFR reported on Tuesday (Aug 1) that the developer cancelled a primary share placement of HK$2.34 billion (S$399 million).
Any payment failure by China’s sixth-largest developer by sales will send fresh shockwaves through the market. Renewed declines in home sales and housing prices, along with an uptick in developer defaults, have highlighted the sector’s deep malaise and added urgency for policymakers to act swiftly on their promises to facilitate funding.
“Country Garden is at high risk of defaulting, unless there is imminent policy support from the government to aid the developer’s access to financing at the enterprise level,” said Leonard Law, senior credit analyst with Lucror Analytics. “The survivability of Country Garden hinges on the policy. Currently, it is uncertain if such support would come.”
Investors are increasingly doubtful whether the company, which was China’s top developer at the end of last year, can maintain its reputation as a rare survivor of the wave of defaults that has engulfed the sector since early 2021.
Country Garden said it expects to swing back to a net loss for the first half this year, underscoring how an enduring property slump is weighing on some of the strongest private builders. JPMorgan Chase & Co downgraded the stock last week as liquidity concerns surrounding China’s private developers are unlikely to ease anytime soon.
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Its dollar note maturing in January 2024 tumbled 41 per cent on Jul 24 amid jitters over the firm’s payment ability. Following a rebound as the developer denied a report saying it has hired KPMG for due-diligence work, the security plunged again on Monday as the firm issued the profit warning.
Country Garden said in a filing it will try to ensure the security of cash flow through various measures including “managing and optimising debt repayment arrangement”.
Policy hopes
With a series of policy efforts last year having failed to turn around the sector, the latest vows following the July Politburo meeting have rekindled hopes. The Politburo is the Communist Party’s top decision-making body.
China’s leaders pledged to optimise and adjust property policies to ensure the sector’s healthy development and omitted the slogan that “houses are for living, not for speculation” for the first time in years. The securities watchdog added last week it will maintain stable financing channels for the sector.
Chinese high-yield dollar bonds whipsawed last week as policy hopes were offset by liquidity concerns. Their prices remain down about 14 per cent from this year’s peak in February, according to a Bloomberg index.
A Bloomberg gauge of Chinese developer stocks retreated from the brink of a bull market on Monday, gaining 17 per cent in the span of a week. Country Garden’s stock has rallied about 25 per cent since a Jul 24 low, but remains a fraction of its 2018 peak.
Renewed defaults
The optimism may quickly fizzle out if policy actions fail to come through. Signs of funding stress have been growing with Central China Real Estate and Greenland Holding Group missing payment deadlines in recent months, highlighting how even some of the once safe-looking developers are struggling.
Country Garden’s US$2.9 billion debt obligation by the end of December is for principals including those for puttable notes as well as interest payments, according to data compiled by Bloomberg. Thirteen of the notes are onshore securities, with 16.5 billion yuan (S$3 billion) due.
More than a third of the maturity wall falls in September. The month will see about 7.8 billion yuan of principal and interest for four onshore notes and US$59 million of coupon for six offshore bonds due.
An official at Country Garden didn’t offer a comment when reached by Bloomberg News, referring instead to public filings.
Below is a list of payments facing the developer this year.
Local bonds:
- 2.21 billion yuan note matures Aug 1 and 99.41 million yuan of interest due
- 800 million yuan note puttable on Aug 12 and 37.52 million yuan of interest due
- 3.91 billion yuan note matures Sep 2 and 220.58 million yuan of interest due
- 1.44 billion yuan note puttable on Sep 14 and 62.14 million yuan of interest due
- 48 million yuan of interest due Sep 19
- 2 billion yuan note puttable on Sep 24 and 87.6 million yuan of interest due
- 492.27 million yuan note matures Oct 21 and 22.15 million yuan of interest due
- 1.78 billion yuan note puttable on Nov 3 and 73.79 million yuan of interest due
- 992.65 million yuan note matures Nov 20 and 49.43 million yuan of interest due
- 800 million yuan note puttable on Dec 13 and 39.04 million yuan of interest due
- 200 million yuan note puttable on Dec 13 and 8 million yuan of interest due
- 1 billion yuan note puttable on Dec 17 and 63 million yuan of interest due
- 43 million yuan of interest due Dec 26
Offshore bonds:
- US$10.5 million of interest due Aug 6
- US$12 million of interest due Aug 6
- RM2.9 million of interest due Sep 4
- 22.68 million Thai baht of interest due Sep 16
- 18.9 million baht of interest due Sep 17
- US$15.38 million of interest due Sep 17
- US$40 million of interest due Sep 27
- RM7.81 million of interest due Sep 27
- 4.48 million baht of interest due Oct 1
- US$17.88 million of interest due Oct 8
- US$48.76 million of interest due Oct 8
- 400 million baht bond matures Oct 19 and 4.03 million baht interest due
- US$15.63 million of interest due Oct 22
- US$9.69 million of interest due Oct 22
- 60.5 million India rupee of interest due Oct 25
- RM1.24 million of interest due Nov 6
- US$14.69 million of interest due Nov 27
- HK$3 billion bond matures Dec 5 and HK$ 67.5 million interest due
- US$9.1 million of interest due Dec 15
- 22.44 million baht of interest due Dec 16
- 18.7 million baht of interest due Dec 17 BLOOMBERG
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