Country Garden latest Chinese property developer to be dumped by investors as US$2.1 billion debt repayments loom
- Country Garden’s dollar bond due July 2026 has lost over a fifth of its value this week and its shares struck an 8-month low on Friday
- The company’s contracted sales slumped 54 per cent in June and analysts say its double-digit decline in home sales will probably continue into the second half
Country Garden Holdings became the latest Chinese property developer to face investors’ ire, as doubts about its debt servicing ability sent its shares and bonds tumbling on Friday even after it got approvals from financial institutions to refinance part of a loan facility.
Its offshore bond due July 2026 dropped 8 per cent to 21.4 US cents, rounding out a 21 per cent plunge for the week, while its yuan bond maturing in November tumbled by as much as 32 per cent to 50 yuan, triggering a trading halt. Country Garden’s shares tumbled by as much as 6.2 per cent to HK$1.37 in Hong Kong, the lowest in eight months.
Overnight, the company signed a deal for dual-tranche term loan facilities for HK$3.58 billion (US$458 million) and US$388.66 million for a term of 36 months.
“We caution that there are several risks that the company still faces, namely inadequate liquidity, large exposure to lower-tier cities, and guarantees provided to associates and joint ventures,” said Sandra Chow of research firm CreditSights in a note. “Given its inadequate liquidity position, coupled with the fact that sufficient contracted sales generation is still vital for any developer’s liquidity, [Country Garden’s] liquidity may be subject to more pressure, at least in the near term.”
The company said its contracted sales slumped 54 per cent from a year earlier to 16 billion yuan (US$2.3 billion) last month and reported a 30 per cent fall in first-half sales to 129 billion yuan.
“The loan signing was a relief but liquidity is still very tight at the company and the sales outlook remains challenging,” Chow said.