Country Garden, China’s largest property developer, told creditors it had made late interest payments, avoiding an immediate default on its debts and keeping the company afloat for now.
Last month, the company missed two interest payments totaling $22.5 million on bonds sold in US dollars. It had a 30-day grace period to default on payment or risk. The deadline ended this week.
Country Garden told bondholders it made the payment within the deadline, a person close to the company said Tuesday.
The delayed payments underscore the financial pressure facing Country Garden, which has been China’s leading homebuilder for the past six years. The company is scrambling to raise cash to handle liabilities that totaled about $187 billion at the end of June. Last week, after reporting a $7.1 billion loss for the first half of 2023, it warned there were “material uncertainties that could cast significant doubt” on its ability to avoid bankruptcy.
It agreed to sell a minority stake in a property development, and it agreed to issue new shares at a discount to a creditor owed hundreds of millions of dollars by Country Garden. The company also reached an agreement with holders of $537 million of its bonds denominated in yuan, the Chinese currency, due last week, to delay debt repayment for three years.
The company said it must pay down nearly $15 billion in debt over the next 12 months in the form of bonds, notes, and bank and other borrowings. Country Garden’s debt due within the next year is more than its current $13.9 billion in cash and cash equivalents.
Once considered a model company in China’s property industry, Country Garden’s cash crunch is the latest sign of the country’s worsening real estate crisis, which has already left dozens of homebuilders in default. , who cannot pay their debts.
Country Garden managed to avoid a spiraling liquidity crisis until recently, when China’s economic slowdown prompted a sharp and sudden slowdown in the company’s property sales. Presales of unfinished apartments, a key indicator of future income, fell more than 50 percent in June and July, twice the rate of decline in the previous five months.
There may be no quick fix to Country Garden’s financial woes. China Evergrande, once considered a rival to Country Garden for the title of top Chinese homebuilder, defaulted on its debt in late 2021, and it continues to restructure its debt and negotiate with domestic creditors for nearly two years before it declared bankruptcy last month.
Country Garden said last week it still owes about $200 million to a subsidiary of Hong Kong-based Kingboard Holdings Limited, a materials and chemicals maker with a property division. It said the amount will be paid in installments, with the final payment due in December.
