Struggling Chinese homebuilder Country Garden said on Wednesday it plans to raise $34 million by issuing new shares, its latest effort to resolve its debt problems and contain a worsening property crisis. assets weighing down China’s economy.
In a filing with the Hong Kong Stock Exchange, Country Garden said it plans to issue 350.6 million shares of the company at 77 Hong Kong cents each next Wednesday. Proceeds do not go to the company. Instead, they will go to a subsidiary of Hong Kong-based Kingboard Holdings Limited, a materials and chemicals manufacturer with a property division to which Country Garden owes millions of dollars.
Country Garden, China’s biggest property developer, is selling shares at a 15 percent discount to Tuesday’s closing price. It is on the brink of default after missing two interest payments earlier this month. The company has until next week to pay offshore bondholders or it will default on creditors.
The financial crisis facing Country Garden is the latest fallout from China’s fast-spreading real estate crisis.
By 2022, Country Garden will have approximately $190 billion in liabilities. In the past few years, several dozen Chinese property developers, including some of the sector’s biggest names, have defaulted under the weight of debt accumulated during years of excessive borrowing.
Country Garden managed to avoid that fate, but a sharp decline in sales starting a few months ago has exacerbated its financial woes. In addition to unpaid interest, the company is in talks with creditors to delay repayment of a Chinese bond, due later this week, until 2026.
It said it still owes the Kingboard Holdings subsidiary about $200 million, payable in installments, with the final payment due in December. The new Country Garden shares represent 1.27 percent of the company’s existing shares.
Later on Wednesday, the company is expected to post results for the first six months of 2023. It warned earlier this month that it expected to post a loss of between $6.2 billion and $7.5 billion for the months. that, citing an “unprecedented difficult period” for China’s property industry.
Shares in the company have fallen 67 percent this year.
