Ping An Insurance denies reports it will take over Country Garden and its mountain of debts, declares zero stake in troubled developer

Country Garden defaulted in late October after it failed to pay US$15.4 million of interest on a dollar-denominated bond
Ping An said it has ‘never received any relevant proposals or requests from any relevant governmental authorities’ with regard to Country Garden

China property

Cheryl Arcibal

Published: 6:00am, 9 Nov 2023

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Ping An Insurance (Group) has denied a Reuters report citing sources that Beijing has asked it to take over Country Garden Holdings and assume its mountain of debts. The nation’s biggest insurer also said it no longer held any stake in the distressed developer.

“The company has never received any relevant proposals or requests from any relevant governmental authorities [or] agencies, and the company has no transaction plan or discussion in connection therewith,” it said in a Hong Kong stock exchange filing on Wednesday. “As of today, the company does not hold any shares of Country Garden Holdings.”

The Reuters report was “completely untrue”, the insurer said, adding that the clarification could prevent shareholders and potential investors from being misled.

Country Garden defaulted late last month after failing to pay a US$15.4 million interest on a dollar-denominated bond, shortly after it warned investors it was facing a liquidity crunch and would miss servicing its offshore debts.

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Country Garden had 257.9 billion yuan (US$35.4 billion) of interest-bearing debt on June 30, according to its latest interim report. About 119 billion yuan of them were in foreign currencies, including US dollar and Hong Kong dollar, mostly in senior notes and corporate bonds. Its total liabilities stood at 1.3 trillion yuan versus 1.43 trillion yuan at the end of 2022.

The latest filing suggests the Ping An group may have sold its stake in the troubled Foshan-based developer over the past three months. The insurer, through its asset management unit in Hong Kong, last reported owning a 4.99 per cent stake in Country Garden on August 11, according to its stock exchange disclosure.

Country Garden trustee notice declares bond default after missed coupon payment

Chinese authorities have asked Ping An to take a controlling stake in Country Garden, Reuters reported on Wednesday, citing four people familiar with the plan. The State Council, headed by Premier Li Qiang, instructed the Guangdong provincial government to help arrange the rescue, it reported.

The report sent Ping An Insurance tumbling by 5.4 per cent to HK$38.50 in Hong Kong trading on Wednesday, while Country Garden surged 12.2 per cent to HK$0.83.

In the first six months of the year, Ping An reported a 1.2 per cent decline in net profit to 69.84 billion yuan. In the last two years, Ping An has raised its investments in rental income property while cutting its exposure to developers.

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Of the insurer’s 4.37 trillion yuan investment portfolio at the end of last year, real estate accounted for 4.7 per cent, with 60 per cent invested in physical buildings, an increase of 10 percentage points from two years ago. The rest was in equities or bonds issued by developers or other property assets.

A liquidity crisis was triggered on the mainland after the government introduced its “three red lines” policy in August 2020 to stem systemic risk from overleveraged developers. Weak developers were shut out of the loan and bond markets, precipitating some US$29 billion of debt defaults since the start of 2021.

Although China’s property market has shown some signs that the worst may be over, home sales fell by 1.5 per cent in the first eight months of the year.

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