Country Garden has received approval from creditors to extend its yuan-denominated bonds due on September 2, a lifeline for the property company amid a deepening property crisis in the world’s second-largest economy.
The extension means Country Garden can repay its debt in installments over three years instead of having to meet its obligations by September 2.
In the vote on September 1, 56.08% of Country Garden's domestic creditors approved the extension, 43.64% opposed it and 0.28% abstained, according to an official document shared with bondholders.
As China’s broader real estate debt crisis enters its fourth year, the challenges for Country Garden, the country’s largest real estate company by revenue, are far from over. The company now has a total debt of about $187 billion.
Country Garden's headquarters in Foshan, China, August 22, 2023. Photo: Forbes
Led by one of China's richest women, Yang Huiyan, Country Garden plays a major role in the national economy with more than 3,100 housing projects in cities and about 70,000 employees.
This huge scale helped Country Garden “survive” the crisis that caused Evergrande Group to default in 2021.
However, the sector’s downturn continues to threaten Country Garden’s survival, which is at risk of being hit harder than Evergrande because its projects are four times larger than Evergrande’s (800 projects).
Country Garden on August 30 announced a net loss of 48.9 billion yuan ($6.7 billion) in the first half of 2023 and warned of default risks.
If this indeed happens, China's property crisis will deepen, putting more strain on domestic lenders.
A construction site of real estate company Country Garden in Beijing, China. Photo: Asia Financial
Country Garden missed two payments on a $22.5 million dollar bond in July. The grace period for those payments ends next week.
The real estate company also has to make monthly dollar interest payments on other offshore bonds due for the rest of 2023, according to CreditSights. It also has onshore bond payments totaling 12.6 billion yuan due later this year.
The real estate sector, which accounts for about a quarter of China's economy, has been going through one crisis after another since 2021.
As companies like Country Garden grapple with financial difficulties, Beijing has rolled out a series of support measures, including cutting mortgage rates and lifting some restrictions on home purchases.
Authorities are preparing further moves to save companies from the deepening crisis , Reuters reported.
Nguyen Tuyet (According to Bloomberg, Reuters)
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