Country Garden’s stocks, bonds tumble after Chinese developer misses US$22.5 million coupon payments on offshore note

Foshan-based developer missed coupon payments for two offshore bonds due on Sunday and was yet to repay them on Tuesday

Country Garden chairwoman Yang Huiyan might help the company by using part of a US$62.8 million dividend payout on her stake in Country Garden Services: Bloomberg Intelligence analysts

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A residential project developed by Country Garden in China’s Hebei province. The developer faces about US$2.9 billion in bond repayments by the end of this year. Photo: Bloomberg

Yulu Aoin Hong KongandZhang Shidongin Shanghai

Published: 6:05pm, 8 Aug 2023Updated: 6:32pm, 8 Aug 2023

Country Garden Holdings, one of China’s biggest property developers by sales, tumbled in both the shares and bonds markets amid concerns about its debt problems after it missed two US dollar bond coupon payments on Tuesday.

The Foshan-based developer missed US$22.5 million in coupon or interest payments for the two offshore bonds due on Sunday and was yet to repay this amount on Tuesday, according to sources. The two notes, which are due in February 2026 and August 2030, have a 30-day grace period, according to the bonds’ prospectuses.

The developer’s shares in Hong Kong tumbled by 14 per cent to HK$1.13 on Tuesday, capping their steepest decline since December 7 last year. Country Garden’s shares have lost 58 per cent of their value this year, and are heading for a fourth straight annual decline. Its 4.98 per cent bond maturing in November 2023 slumped by 28 per cent to 28 yuan.

Country Garden’s usable cash is decreasing continually and it has faced liquidity pressure periodically because of underperforming contracted sales and a worsening refinancing environment coupled with tightened regulations, according to people familiar with the matter. Its contracted sales for July plunged by 60 per cent from a year earlier.

The company is improving capital arragenments to ensure the legal rights of creditors, the sources said.

“Country Garden might use the 30-day grace period to repay the US$22.5 million in coupons due on August 6 on its two kung fu bonds,” said Daniel Fan and Adrian Sim, credit analysts at Bloomberg Intelligence.