The company logo of Chinese developer Country Garden is pictured at the Shanghai Country Garden Center in Shanghai, China August 9, 2023. REUTERS/Aly Song/File Photo Acquire Licensing Rights
HONG KONG, Oct 18 (Reuters) – Country Garden Holdings (2007.HK), China’s biggest private property developer, is less than an hour away from a potential default on its $11 billion in overseas debt as it has yet to make a coupon payment.
If it misses the payment, Country Garden would join scores of other Chinese developers who have defaulted, deepening the crisis roiling the property sector, which makes up about a quarter of the world’s second largest economy.
Country Garden could be deemed in default on its overseas debt if it does not make a $15 million payment for a September 2025 bond by midnight in New York (0400 GMT).
The repayments had not been made by early Wednesday, a source familiar with the situation said. The company last week warned of its inability to meet offshore debt obligations.
Country Garden declined to comment.
With nearly $11 billion of offshore bonds and $6 billion of onshore loans, a default by Country Garden would set the stage for one of China’s biggest corporate debt restructurings.
Country Garden has also missed other offshore payments in the past few weeks, though those payments still have not seen their 30-day grace periods lapse.
The company is, however, in better shape with its onshore debt, having gained some breathing room with payment extensions.
Last month it won approval from creditors to extend repayment on an onshore bond, the last in the batch of eight bonds it had been seeking extensions for, sources have said.
The eight bonds worth 10.8 billion yuan ($1.48 billion) have each been extended by three years.
A CreditSights report published on Tuesday found China’s state-linked developers could still access funding markets while the private firms were struggling to source new capital.
“With homebuyers still biased towards state-linked developers, those privately-run developers still not yet in a default would likely find staying afloat an increasingly challenging prospect, squeezed by both insufficient contracted sales generation and funding inaccessibility,” the report said.
A default would open the way for Country Garden’s offshore creditors to begin negotiations with the firm’s financial advisors. A restructuring process could take many months given the scale of the debt.
China’s bleak property market outlook is likely to worsen the terms that offshore creditors may have to accept as debt is restructured.
Data on Wednesday showed property investment in China slid 9.1% for the first nine months of the year. Sales by floor area dropped 7.5%.
Nationwide prices of new homes for September will be released on Thursday.
Developers accounting for 40% of Chinese home sales have defaulted on their debt obligations since 2021, according to JPMorgan. Those companies, mostly private, have issued around $110 billion worth of high-yield offshore bonds.
Hong Kong’s Hang Seng Mainland Properties Index (.HSMPI) is down 40% so far this year.
($1 = 7.3110 Chinese yuan)
Reporting by Scott Murdoch in Sydney; Editing by Sonali Paul and Edwina Gibbs
