HomeBusinessCountry Garden faces a new test for land bond expansions

Country Garden faces a new test for land bond expansions

By Xie Yu

HONG KONG (Reuters) – Embattled developer Country Garden faces another round of votes from creditors on Monday to extend several debt maturities after avoiding two last-minute defaults this month to bring some calm to the crisis-hit Chinese real estate sector.

The vote, which will end at 10pm Hong Kong time (1400 GMT) on Monday, will see onshore creditors decide whether to approve a proposal by Country Garden to extend repayments on eight onshore bonds by three years.

The latest vote comes after the country’s largest private developer received approval from creditors on September 1 to extend payments by three years on a 3.9 billion yuan ($533 million) onshore private bond.

That vote was postponed twice before Country Garden’s proposal won the support of 56.08% of participating creditors. It has also managed to avoid defaults in the offshore market, with a last-minute bond coupon payment last week.

Country Garden’s bondholders will vote separately on Monday on proposals to extend the maturities of eight onshore bonds issued by the developer and a subsidiary that would mature in 2023 and 2024 and be putable.

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Country Garden did not immediately respond to a request for comment.

Country Garden, one of the few major Chinese developers that has not defaulted on its debt, has faced liquidity pressures and reduced available funds as sales plummeted, its interim financial statements show.

The company faces debts worth 108.7 billion yuan ($14.9 billion) due within 12 months, while its cash level at the end of June is around 101.1 billion yuan, according to its interim financial statement Company.

In the offshore market, Country Garden has at least five coupon payments this month, including two relatively sizable dollar bond coupons worth $15 million, payable on September 17, and $40 million on September 27, each with a 30-day grace period.

Any bankruptcy by Country Garden would worsen the country’s spiraling real estate crisis, increasing pressure on struggling banks and delaying the recovery of not just the real estate market, but the Chinese economy as a whole.

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Country Garden has so far shown a “greater willingness to avoid bankruptcy” compared to many of its peers, said Nicholas Chen, a Singapore-based analyst at research firm CreditSights.

Chen expects that Country Garden will continue to seek to defer bond payments due in both the onshore and offshore markets, given its inadequate liquidity position.

He also said Chinese regulators were likely involved with the developer due to “a potential contagion risk for other upstream and downstream sectors, as well as for the various local governments,” although specific intervention remains unknown.

($1 = 7.3490 Chinese Yuan Renminbi)

(Reporting by Xie Yu; Editing by Sumeet Chatterjee and Lincoln Feast.)

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