China’s largest property developer failed to make its international debt payments, resulting in a blow to China’s already worsening property market crisis.
Country Garden, China’s largest developer, warned on Tuesday that it was struggling to repay its overseas debt due to plunging sales, resulting in “adverse market conditions,” potentially leaving them unable to repay any debts moving forward. Its sales have reportedly faced “remarkable pressure,” which worsened its problems.
Chinese property developer Country Garden ramps up signals that it’s set for its first-ever default, stating it's unable to pay all its offshore debt on time.
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— Bloomberg TV (@BloombergTV) October 10, 2023
The 31-year-old developer had already failed to make a HK$470 million ($60 million) debt payment and faces the end of a 30-day grace period for making payments next week. Country Garden has roughly $187 billion in liabilities as of June this year, and nearly $15.3 billion in dollar-denominated offshore bonds, but has not defaulted yet.
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According to a statement to Hong Kong, the company said it “expected that it will not be able to meet all of its offshore payment obligations when due or within the relevant grace periods, including but not limited to those under the U.S. dollar notes issued by the company.”
China’s real estate market started in 2021, following the Chinese government’s decision to introduce new regulation aimed at reining in the country’s property sector, leaving them unable to complete pre-sold homes.
The company’s Hong Kong-traded shares sank 10.7% on Tuesday. Country Garden has received loans from some banks, including a $50 million loan from China Minsheng Banking Corporation earlier this year, and a $250 million loan from the Hong Kong unit of the Industrial & Commercial Bank of China in December 2022.
Beijing rolled out a raft of measures in recent months, including reducing deposit requirements and cutting existing mortgage rates to help revive homebuyers’ confidence. Country Garden stated they appointed Houlihan Lokey investment bank, China International Capital Corporation, and Sidley Austin law firm advisors to examine its capital structure and liquidity position to come up with a “holistic solution.”
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