China's real estate giant temporarily avoids bankruptcy

Country Garden has been granted an extension by creditors to pay off a batch of bonds, thereby avoiding a default scenario.

(09.02) Công ty Country Garden (Trung Quốc) đang đối mặt với nhiều khoản nợ lớn. (Nguồn: Bloomberg)

Country Garden (China) is facing many large debts. (Source: Bloomberg)

This week, bondholders of Country Garden, China’s leading real estate group, voted on whether to extend the repayment terms of a 3.9 billion yuan ($535 million) bond to 2026.

If challenged, Country Garden would face the risk of becoming China's biggest real estate company to default since a similar scenario befell Evergrande in 2021.

But by the end of September 1, Country Garden bondholders had agreed to extend the payment until 2026 for the bonds, which were originally due to be paid on September 2. Country Garden has not confirmed the outcome of the vote.

However, China’s largest real estate developer in 2022 is not yet “safe”, as two more bonds worth $22.5 million are due for interest payments next week.

Country Garden failed to make this payment obligation in early August and was given a 30-day grace period, which is scheduled to end on September 5. If it still fails to make this interest payment, Country Garden is at risk of default.

This week, credit rating agency Moody's further downgraded Country Garden's debt rating from Caa1 to Ca, meaning it is "highly speculative and may be in or near default."

Explaining the decision, Moody's Senior Vice President Kaven Tsang said that Country Garden has a tight liquidity situation and a high risk of default.

Country Garden is currently saddled with a large amount of debt, estimated at 1.43 trillion yuan ($196 billion) by the end of 2022. The company reported a record loss of 48.9 billion yuan in the first half of this year.

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