Chinese real estate company Country Garden, facing new coupon expiration in dollars

The embattled Chinese property developer Country Garden faces another test of liquidity, as it must pay $15 million in interest on an offshore bond on Monday, having dodged a last-minute default on two occasions this month.

Country Garden, whose financial problems have worsened the real estate sector’s prospects and prompted a series of support measures from Beijing, will have a 30-day grace period to pay the coupon before it is considered in default.

The $500 million 6.15% bond matures in September 2025. As of late Monday afternoon, the coupon payment had not been received, said a holder of the bond tranche, who requested anonymity because he was not authorized to speak. talk to the media.

If Country Garden does not pay the coupon before the grace period ends in mid-October, the principal will expire and any default on service will trigger cross-default conditions, it said. Sandra Chowco-director of Asia-Pacific research at CreditSights.

“It will be very difficult“for Country Garden to meet its debt obligations due to falling cash levels at a time when property sales in the world’s second-largest economy remain very weak, it said Chow.

A spokesperson for Country Garden It did not respond to a Reuters request for comment on its latest debt payment obligation.

The actions of Country Gardenone of the few large Chinese developers that have not defaulted on their debt obligations, closed down almost 2%, outperforming the benchmark index’s 1.4% drop.

Last month, the company warned of the risk of default if its financial results continued to deteriorate. It has debt of 108.7 billion yuan ($14.9 billion) due in 12 months, but as of June it only had about 101 billion yuan in cash.

It avoided default by winning creditor approval to extend payments on a private onshore bond, a huge relief for the beleaguered Chinese developer as well as the crisis-hit real estate sector.

In August, the developer failed to pay the US$22.5 million coupons corresponding to two dollar bonds, but managed to transfer the funds before the grace period ended this month, thus avoiding default.

Last week, onshore bondholders approved a three-year extension of repayments on seven more Country Garden bonds.

Many creditors believe that Country Garden will have to restructure its offshore debt if it does not receive liquidity support soon.

Some offshore creditors have started talks with the law firm Kobre & Kim LLPbased in New York, and with Ashurst, based in London, and are studying the possibility of forming groups if the developer tries to restructure the debt.

State support

China has put in place support measures to help revive the real estate sector, which accounts for about a quarter of its economy and is reeling from an unprecedented liquidity crisis since 2021.

However, a survey conducted by JPMorgan “Last week showed that investors’ biggest concern was a political response.”ineffective”, followed by contagion to the banking system and a double drop in real estate sales.

The survey of Chinese and global investors also showed that the worst of the real estate crisis is not yet over.

As a sign of Beijing’s efforts to contain contagion risks, two state-owned financial companies have been tapped to provide operational and management support to the struggling bank. Zhongrong International Trust Co.

Zhongrongwhich has traditionally had considerable exposure to the real estate sector, has defaulted on dozens of so-called trust products since late July, roiling markets and fueling fears that the real estate crisis could threaten the financial system.

It was not immediately clear whether authorities had designed support for the two companies, but Beijing has previously bailed out troubled financial firms by turning to state-owned entities to contain the risk of contagion.

On Friday, China’s financial regulator also approved the creation of a new state-backed insurance company, Hai Gang Life, to take over the assets and liabilities of the insurance unit of bankrupt developer China Evergrande Group.

The new company will safeguard the interests of the unit’s clients and creditors during the transition to the state-backed company, the regulator said in a statement.

The non-payment of Evergrande At the end of 2021, the most indebted real estate developer in the world triggered a series of defaults from other builders.