Country Garden dodges new default in relief for Chinese property sector

the chinese company Country Garden paid the interest on US dollar bonds hours before the grace period expired, a person close to the company said, moving it away from defaulting for the second time in four days and bringing some relief to the real estate from the country.

China’s largest private real estate developer had failed to pay coupons on bonds totaling US$22.5 million due on August 6, exacerbating fears about the company’s cash situation and sending markets on edge. during the 30-day grace period.

Although the amount was relatively modest, defaulting would have undermined financial markets’ fragile hope that the steady trickle of stimulus measures from China is beginning to stabilize the real estate market and the economy in general.

It would also have increased the risk of default and demands by creditors of other dollar bonds to speed up payments, investors and lawyers said.

Country Garden It also offered on Tuesday to extend the redemption of eight local bonds worth 10.8 billion yuan ($1.48 billion) by three years, according to people with knowledge of the matter and documents seen by Reuters.

The bonds, issued by Country Garden and one unit, expire in 2023 and 2024, according to documents sent to creditors.

Country Garden did not immediately respond to a request for comment. The source close to the company declined to be identified as he was not authorized to speak to the media.

“Country Garden is trying to meet its debt obligations, but the continuation of this situation will depend on the effectiveness of this round of stimuli and the relaxation of regulations (restrictions on the real estate sector).“, said gary ngchief economist of Natixis Asia Pacific.

The latest government stimulus measures include cuts in existing mortgage rates and preferential loans for first-time homebuyers in big cities, but many analysts say more will be needed to stabilize the property sector, restore confidence and sow seeds of eventual recovery.

struggling economy

The plight of Country Garden highlights the fragile state of the chinese real estate industrywhich represents approximately a quarter of the world’s second largest economy and whose situation has deteriorated since the government launched a campaign against its high leverage in 2021.

The payment known Tuesday is given after Country Garden won approval from its creditors on Friday to extend the maturity of a private bond worth 3.9 billion yuan ($536 million).

Country Garden it had not defaulted on any debt payment obligations, either in the domestic or foreign markets, until it defaulted on the coupons on the two dollar bonds last month, after the slowdown in demand for new homes translated into in lower cash flow.

In addition to payments due Tuesday, Country Garden has about $162 million of interest remaining on offshore bonds to pay in the remainder of the year, according to data from CreditSights.

Source: Reuters