A creditor submitted a liquidation request to the Hong Kong Justice against the indebted Chinese real estate giant Country Garden due to the non-payment of 1.6 billion Hong Kong dollars (US$204 million) of a loan, the developer reported today.
In a statement sent to the Hong Kong Stock Exchange – where it is listed – the company that was the largest promoter in China between 2017 and 2022 reveals that the company in question, Ever Credit Limited, presented the aforementioned application on Tuesday, and assures that “will firmly oppose” to the lawsuit, whose first hearing has been set for next May 17.
“The company will seek legal advice and take all necessary actions to protect its legal rights (…) as the board of directors is of the opinion that the request does not represent the interests of other parties involved and could harm the value of the company,” Add the document.
In statements to the Hong Kong newspaper South China Morning Post, a spokesperson for Country Garden assured that “The amount of group debt affected in this case represents a very small proportion of our ‘offshore’ liabilities, and aggressive action by a single creditor will not have a significant impact on the company’s guaranteed delivery of homes, its normal operations nor its foreign debt restructuring.”
In any case, the developer – declared in default last year – stated that it will try to negotiate with Ever Credit “in a friendly manner” and noted that he hopes that the request “does not have a substantial impact on the offshore (debt) restructuring process or its timing.”
Support for the restructuring plan
Country Garden “encourages all interested parties to maintain their confidence and support in efforts to promote an offshore restructuring solution that maximizes value preservation and protects the interests of all parties.”
“The company will continue to firmly defend the interests of its investors, guaranteeing the delivery of developments in both quality and quantity, and ensuring its stability and normal operations,” adds the statement.
Country Garden was first declared in default at the end of October after failing to pay on time some US$15.4 million owed in interest on a dollar-denominated bond, Bloomberg reported at the time, echoing a notice to holders issued by the trustee. , Citicorp.
At the end of the first half of 2023, Country Garden’s debt amounted to about 257.9 billion yuan (US$35.824 million), of which about 109.0 billion yuan (US$15.141 million) mature around June of this year.
Last month, the company, which is seeking to dispose of assets to raise funds to meet its liabilities, revealed that it had hired the consulting firm KPMG as main advisor for the restructuring process of its offshore debt, estimated at around 16,500 millions of dollars.
A long crisis
At the end of January, the Hong Kong Justice ordered the liquidation of another of the big names of the Chinese real estate crisis, Evergrandein favor of its foreign creditors, a ruling that opens a long and uncertain process in the doubt of whether it will be recognized in mainland China, where the majority of its assets are, since the judicial system of the former British colony is separate from the Chinese by virtue of its semi-autonomous status.
The financial position of many chinese real estate It worsened after, in August 2020, Beijing announced restrictions on access to bank financing for developers that had accumulated a high level of debt, among which Evergrande stood out, with a liability of almost US$330 billion.
In recent months, given the situation, the Government announced various support measures, with state banks also opening multimillion-dollar lines of credit to various promoters, to which the completion of projects sold off-plan was marked as a priority, a matter of concern. to Beijing for its implications for social stability, since housing is one of the main investment vehicles for Chinese families.
However, the market is not responding: commercial sales measured by floor area plummeted 24.3% in 2022 and another 8.5% in 2023, while new home prices fell in December at their fastest pace in almost nine years .
In the specific case of Country Garden, in the accumulated of the first three quarters of 2023 its sales fell almost 44% year-on-year and 65% compared to the same period in 2021, which led it to suffer a “significant liquidity pressure.”
One of the main causes of the recent slowdown of the Chinese economy is precisely the crisis in the real estate sector, whose weight on the national GDP – adding indirect factors – was estimated at around 30%, according to some analysts.
Source: Gestion
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