Cash-squeezed developer Country Garden faces another offshore bond deadline
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Country Garden in August warned of default risks if its financial performance continues to deteriorate.
PHOTO: REUTERS
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HONG KONG – Embattled Chinese property developer Country Garden faces yet another liquidity test with Monday’s deadline to pay US$15 million (S$20.4 million) in interest linked to an offshore bond, after having dodged default at the last minute twice in September.
The country’s No. 1 private developer, whose financial woes have worsened the property sector outlook and prompted Beijing to unveil a raft of support measures, will have a 30-day grace period to pay the coupon before it would be considered in default.
If Country Garden fails to pay the US$15 million before the grace period ends in mid-October, the principal will become due immediately and any failure to service will trigger cross-default terms, said Ms Sandra Chow, co-head of Asia-Pacific research at CreditSights.
“It’s going to be really hard” for Country Garden to meet debt obligations due to its tumbling cash levels at a time when property sales in the world’s second-largest economy remain very weak, Ms Chow said.
A Country Garden spokesman did not immediately respond to a Reuters request for comment on Monday about its latest debt repayment obligation.
Country Garden in August warned of default risks if its financial performance continues to deteriorate. It has 108.7 billion yuan (S$20.6 billion) of debt due within 12 months but cash of only around 101 billion yuan as at June.
It avoided default by winning approval from its creditors to extend payments on an onshore private bond, in a major relief for the embattled Chinese developer as well as the crisis-hit property sector.
The developer in August missed coupon payments worth US$22.5 million tied to two dollar bonds but managed to wire funds before a grace period ended earlier in September, dodging a default.
Last week, onshore bond holders approved to extend repayments of seven other Country Garden bonds by three years.
Shares in Country Garden, one of the few large Chinese developers that have not defaulted on debt obligations, were trading up nearly 1 per cent in Hong Kong, while the broader market was down 0.9 per cent.
Many creditors believe that Country Garden will have to restructure its offshore debt if it does not get liquidity support soon.
Some offshore creditors of Country Garden have started talks with New York-based law firm Kobre & Kim and London-based Ashurst, and are looking at forming groups if the property developer seeks to restructure its debt. REUTERS
