By Scott Murdoch and Rishav Chatterjee
(Reuters) -China’s Country Garden Holdings said it might not be able to meet all of its offshore payment obligations when due or within the relevant grace periods, as the country’s largest private property developer grapples with debt restructuring.
“Such non-payment may lead to relevant creditors of the Group demanding acceleration of payment of the relevant indebtedness owed to them or pursuing enforcement action,” the company said in a Hong Kong Stock Exchange filing on Tuesday.
The group is currently facing “significant” uncertainty regarding disposing of its assets and its cash position remains under pressure, Country Garden added.
The developer said it had appointed Houlihan Lokey, China International Capital Corporation (CICC) and law firm Sidley Austin as advisers to examine its capital structure and liquidity position.
Country Garden shares rose 3% in early trading on Tuesday, having lost nearly 70% of their value since the start of the year.
Companies accounting for 40% of Chinese home sales – mostly private property developers – have defaulted on debt obligations since a liquidity crisis hit the sector in 2021, leaving many homes unfinished.
The problems have deepened in the past two years as confidence in housing and capital markets dried up, further squeezing developers’ liquidity.
Country Garden was due on Monday to pay $66.8 million in coupons on 2024 and 2026 dollar bonds, although the payments have a 30-day grace period.
The developer faces another big test next week when its entire offshore debt could be deemed in default if it fails to pay a $15 million September coupon by Oct. 17.
Country Garden has $10.96 billion of offshore bonds and 42.4 billion yuan ($5.81 billion) worth of loans not denominated in yuan. If it defaults, these debts will need to be restructured, and the company or its assets also risk liquidation by creditors.
The company recorded contracted sales of around 154.98 billion yuan for the nine months ended September, a drop of about 43.9% and 65.4%, compared with corresponding periods in 2022 and 2021.
Country Garden said it would make “its best effort to ensure the delivery of properties, which is the group’s most critical corporate responsibility and is the key pillar to safeguard the property market.”
China’s government has recently implemented a range of measures from reducing deposit requirements to cutting existing mortgage rates in some cities to help renew confidence among home buyers to support the property market.
(Reporting by Scott Murdoch in Sydney and Rishav Chatterjee in Bengaluru; Editing by Rashmi Aich, Lincoln Feast and Jamie Freed)
