Country Garden’s plan to extend 10.8 billion yuan of bonds faces vote
DISTRESSED Chinese developer Country Garden Holdings is entering the final hours of voting by creditors on its request to extend a group of local bonds. The outcome could determine if it faces a major repayment demand as soon as Thursday (Sep 14).
The country’s former largest builder is asking to stretch principal payments of eight yuan notes by three years, just days after it dodged a default on dollar securities at the last minute. The yuan bondholders started voting Sep 7 and finish at 10.00 pm Beijing time on Monday, Sep 11. The outstanding principal of the securities totals 10.8 billion yuan (S$2 billion).
One key focus is a 1.435 billion yuan note with a put option on Sep 14. Country Garden must win approval to extend it or risk the chance that holders could demand early repayment on Thursday. The company has left much smaller payments go right up until final deadlines recently, including a combined US$22.5 million in interest it paid in the final hours of grace periods ending Sep 5-6.
Country Garden’s tumble into crisis has shocked China’s financial markets because it’s a household name, known for building homes in smaller cities. Helmed by one of the country’s richest women Yang Huiyan, the builder has become a symbol of a broader property debt crisis that’s led to record nonpayments and prompted authorities to adjust policy to try to avoid more contagion.
The company has so far avoided defaulting but recently warned it still could, after posting a record first-half loss of almost US$7 billion. Credit traders are treating that risk seriously, indicating the developer’s dollar bonds at deeply distressed levels of 9 US cents to 14 US cents.
Country Garden has had some more positive news in recent days, even as it’s far from out of the woods. Along with other developers whose shares have traded at or near penny-stock levels, it surged in the stock market last week after authorities introduced bolder measures recently including lowering down payments and loosening some mortgage rules.
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And it’s navigated other recent deadlines beyond the interest on the dollar bonds. It gained approval in a separate creditor vote that ended earlier this month to extend payments into 2026 on a local bond with 3.9 billion yuan of outstanding principal. The builder also wired a RM2.85 million (S$831,877) coupon coming due on a bond in the Malaysian currency.
Yet, the company, now China’s sixth-biggest developer as sales have slumped this year, still has nearly US$2 billion of bond payments across different currencies due through the rest of the year.
Any payment failures could impact China’s housing market even more than a landmark default in late 2021 by China Evergrande Group, as the builder has four times as many projects.
The votes ending later on Monday could lead to separate decisions for each of the eight bonds. Seven of them were issued by unit Country Garden Real Estate and one by unit Guangdong Giant Leap Construction. BLOOMBERG
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