Top Chinese developer Country Garden offers to buy back US$683 million bond in show of financial strength amid sector’s protracted debt woes

The Shenzhen-based company has offered to purchase for cash all of the bond carrying 4.75 per cent of interest and due on July 25 at par, or 100 cents on the dollar, and accrued semi-annual interest, it said in a filing to Hong Kong’s bourse on Wednesday.

The company is making an offer to purchase for cash “any and all of its outstanding notes at a purchase price of US$1,000 per US$1,000 principal amount of the notes”, Country Garden said in its filing. It intends to finance the offer with internal funds and bondholders have until June 22 to accept the offer.

“Given the offer is made just over a month in advance of the maturity date, it appears a move to demonstrate its financial capability and to dispel speculation that it may have liquidity issues amid incessant negative news about the industry’s debt troubles,” said Raymond Cheng, head of China and Hong Kong research at CGS-CIMB Securities International.

The repurchase offer should give investors the confidence that Country Garden will not have trouble repaying debt in the next six to 12 months, Cheng said. Other privately-controlled mainland Chinese developers, however, may not necessarily be in the position to do the same, he added. “It really depends on the circumstances of the individual companies,” he said. “This offer illustrates Country Garden’s healthy balance sheet and financial position.”

Wang Qi, a co-founder of MegaTrust Investment (Hong Kong), a boutique China asset manager, concurred. “This is perhaps one of the few cases where a Chinese real estate developer is willing and able to defend its credit. However, this is company specific. Global investor confidence in Chinese real estate is long gone,” he said.