Country Garden misses a bond payment, signals possible default on part of its US$16.5 billion offshore debts as China’s housing slump persists
- Chinese developer did not pay a HK$470 million (US$60 million) principal when due, signalling possible default on its offshore borrowings
- Contracted home sales tumbled for a sixth month in September, filing shows, depriving firm of critical source of cash flow
The Chinese developer failed to repay a HK$470 million (US$60 million) principal under its indebtedness, according to a stock exchange filing in Hong Kong on Tuesday. The company expects that it will not be able to meet all of its offshore payment obligations, including dollar-denominated bonds, it added.
Such non-payment may lead to relevant creditors demanding acceleration of payments or pursuing enforcement actions, it said, adding that it would cooperate and engage all creditors to reach a feasible solution.
The developer, based in Foshan in southern Guangdong province, hired China International Capital Corp and Houlihan Lokey as its joint financial advisers, and Sidley Austin as its legal adviser, to evaluate its capital structure and liquidity.
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China’s “three red lines” policy, unveiled in August 2020 to curb excessive leverage among weak developers, has continued to claim fresh victims as consumer confidence in home builders cracked. Country Garden has missed payment deadlines on bond coupons in recent months, crashing its stock and bond prices.
Country Garden had 257.9 billion yuan (US$35.8 billion) of interest-bearing debt on June 30, according to its latest interim report. Among its 118.5 billion yuan of non-yuan debt, one-third was denominated in the US dollar and 11 per cent in Hong Kong dollar, mostly in senior notes and corporate bonds.