Country Garden staves off worsening of debt crisis with payment of renminbi bond

HONG KONG – Chinese developer Country Garden Holdings,

which defaulted on United States dollar bonds

in October, took steps to prevent its debt crisis from worsening, paying off a renminbi note ahead of schedule and selling a stake in a mall operator.

The distressed builder’s onshore unit, Country Garden Real Estate Group, repaid in full an 800 million yuan (S$150 million) security with a put option that expired on Dec 13, it said in a filing to the Shenzhen Stock Exchange. It also sold an investment in Zhuhai Wanda Commercial Management Group for 3.07 billion yuan to raise cash for offshore debt restructuring.

The latest moves by China’s former top builder injected a sense of relief among investors, following a dollar bond default in October that roiled financial markets. They also came hot on the heels of a top housing official’s pledge to avoid a cascade of debt defaults by developers, among the strongest commitments yet to ease the industry’s unprecedented cash crunch. 

Earlier on Dec 13, Mr Dong Jianguo, Vice-Minister of Housing and Urban-Rural Development, said that China would “forcefully prevent developers from defaulting on their debts all at once”.

Country Garden’s shares rose as much as 9.1 per cent in Hong Kong on Dec 14, before paring the gains to less than 3 per cent. At around HK$0.80 (S$0.14) a share, it remains a penny stock.

The firm said in a statement explaining its stake sale in Zhuhai Wanda that it is working to resolve liquidity pressure and seeking a “comprehensive solution” to its offshore debt risks. 

At least several holders of the renminbi note received payment on the morning of Dec 14, said people familiar with the matter who requested anonymity discussing private matters. After the latest renminbi note repayment, the developer has around US$13 billion (S$17.3 billion) of bonds outstanding, according to data compiled by Bloomberg.

Country Garden was

included in a draft list of 50 developers

eligible for a range of financing support, people familiar with the matter said in November. The builder, whose liquidity crunch shook the nation’s financial markets earlier in 2023, has yet to default on any local notes.

Helmed by one of China’s richest women, Ms Yang Huiyan, Country Garden’s sheer size has made it important to the economy, where the property market, along with related industries, accounts for about 20 per cent of gross domestic product. Along with China Evergrande Group, whose default in 2021 opened the door to record non-payments from other builders, it has come to symbolise the nation’s broader real estate crisis.

China has rolled out fresh measures to strengthen developers, adding to a slew of moves over the past year, mostly aimed at stoking demand for homes. Such steps have largely failed, with home sales plunging in 18 of the past 22 months. Buyers remain on the sidelines, spooked by construction delays, falling prices and company defaults. BLOOMBERG