Country Garden holders vote on extending 3.9 billion yuan local bond
COUNTRY Garden bondholders will finish voting later on Friday (Aug 25) on the distressed Chinese developer’s plan to extend payment on a yuan note coming due, a key test as the company tries to avoid its first default.
The country’s former largest builder has asked to stretch payment of the 3.9 billion yuan (S$725.8 million) of outstanding principal into 2026. Online voting ends at 10 pm Beijing time.
Some noteholders have demanded full repayment by the effective due date of Sep 4, the first business day following the note’s maturity date two days earlier. The offering document does not say if there are grace periods for the bond. Meanwhile, extra time for Country Garden to pay a combined US$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 US$2.9 billion of note obligations for the rest of 2023. The company has warned about “major uncertainties” about bond redemption.
Country Garden did not immediately offer a comment when reached on 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 the construction of purchased residences have 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 on the dollar, and made the company the worst performer this month in a Bloomberg index of such debt issuers in Asia. The company’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 per cent from a Jul 28 peak, hitting record lows this week. BLOOMBERG
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