Country Garden avoids first bond default before another US$22.5 million payment test on September 6 for two US dollar bonds

Chinese developer averted what would have been its first-ever bond default last week

Company has about 108 billion yuan of debt and borrowings coming due by June 2024, according to an interim report to shareholders

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Published: 6:05pm, 4 Sep 2023Updated: 6:07pm, 4 Sep 2023

Country Garden Holdings bought more time to reorganise its finances after creditors agreed on a proposal to delay a debt payment last week. Another test looms this week, as a deadline for coupon payments on two offshore bonds approaches.

The developer must pay a total of US$22.5 million in coupons by September 6, when a 30-day grace period ends. The semi-annual interest payments were originally due on August 6 to holders of its US$490 million February 2026 bonds and a US$500 million August 2030 note.

Failure to pay could trigger a cross-default, including for some of its 16 billion yuan (US$21.5 billion) of bank borrowings as of June 30. The company declined to comment on whether it had remitted funds to bondholders when contacted by the Post on Monday.

China’s three-year housing market slump has hurt sales at the country’s biggest developers, starving them of crucial cash flow to keep their businesses afloat and repay creditors. Waning confidence among homebuyers has put pressure on its operations, Country Garden said last month.

Country Garden’s share price soared 14.6 per cent to HK$1.02 in Hong Kong on Monday, paring a 67 per cent slide in the stock this year. The stock will exit its Hang Seng Index membership from Tuesday, and will be replaced by Sinopharm, following a quarterly review.

About 50.7 per cent of investors last week agreed to give the company 40 days to repay a 3.9 billion yuan bond, the single largest piece of debt on its books.