Country Garden Holdings, one of China’s largest property developers, is requesting a six-month extension on the coupon and principal payments for nine onshore bonds due this month, as the company faces a financial crisis exacerbated by plummeting home sales. The Foshan-based developer announced to bondholders on Wednesday that it is struggling to raise sufficient funds to cover its obligations, citing weak property sales and regulatory restrictions on fund allocations.
The developer’s sales performance has been under severe pressure, with total contracted sales for the first eight months of 2024 dropping by 78% compared to the previous year, amounting to just 32.8 billion yuan (US$4.6 billion). Country Garden attributed these challenges to waning market confidence and sluggish demand in the property sector. The company is currently exploring various avenues to raise funds, including selling properties, revitalizing assets, and cutting administrative expenses.
This is not the first time Country Garden has sought an extension on bond payments. Last year, the developer received extensions on several bonds, with three of them being further extended in April 2024. The latest request aims to provide the company with additional time to formulate a comprehensive debt restructuring plan that aligns with the current market conditions.
Market analysts, including Raymond Cheng from CGS International Securities, expect that bondholders will likely agree to the extension, though concerns remain about whether the six-month timeframe will be sufficient for the developer to stabilize its financial position.
Country Garden, once the largest developer in China by sales, has been under growing pressure since October 2023, when it defaulted on a US bond, sparking concerns across the bond and stock markets. In July, the Hong Kong High Court granted the company almost six months to devise a restructuring plan following a winding-up hearing.
The company’s challenges have also impacted its regulatory obligations. Last Friday, Country Garden announced it would delay the publication of its 2023 financial results due to its ongoing debt restructuring process. As a result, its shares have been suspended from trading on the Hong Kong Stock Exchange since April.
Country Garden is not alone in its struggles. Other Chinese developers, such as China Vanke, are also under immense pressure to repay their debts. Vanke recently secured an 11.5 billion yuan loan to maintain business operations after reporting its first interim loss in two decades. The broader property market in China remains in a precarious state as developers navigate increasing financial challenges.
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