Distressed Chinese developer Country Garden Holdings Co. is entering the final hours of voting by creditors on its request to extend a group of local bonds. The outcome could determine if it faces a major repayment demand as soon as Thursday.
(Bloomberg) — Distressed Chinese developer Country Garden Holdings Co. is entering the final hours of voting by creditors on its request to extend a group of local bonds. The outcome could determine if it faces a major repayment demand as soon as Thursday.
The country’s former largest builder is asking to stretch principal payments of eight yuan notes by three years, just days after it dodged a default on dollar securities at the last minute. The yuan bondholders started voting Sept. 7 and finish 10:00pm Beijing-time Monday Sept. 11. The outstanding principal of the securities totals 10.8 billion yuan ($1.5 billion).Â
One key focus is a 1.435 billion yuan note with a put option Sept. 14. Country Garden must win approval to extend it, or risk the chance that holders could demand early repayment Thursday. The firm has left much smaller payments go right up until final deadlines recently, including a combined $22.5 million in interest it paid in the final hours of grace periods ending Sept. 5-6.
Country Garden’s tumble into crisis has shocked China’s financial markets because it’s a household name, known for building homes in smaller cities. Helmed by one of the country’s richest women Yang Huiyan, the builder has become a symbol of a broader property debt crisis that’s led to record nonpayments and prompted authorities to adjust policy to try to avoid more contagion.
The firm has so far avoided defaulting but recently warned it still could, after posting a record first-half loss of almost $7 billion. Credit traders are treating that risk seriously, indicating the developer’s dollar bonds at deeply distressed levels of 9 to 14 cents.
Country Garden has had some more positive news in recent days, even as it’s far from out of the woods. Along with other developers whose shares have traded at or near penny-stock levels, it surged in the stock market last week after authorities introduced bolder measures recently including lowering down payments and loosening some mortgage rules.
And it’s navigated other recent deadlines beyond the interest on the dollar bonds. It gained approval in a separate creditor vote that ended earlier this month to extend payments into 2026 on a local bond with 3.9 billion yuan of outstanding principal. The builder also wired a 2.85 million ringgit ($609,430) coupon coming due on a bond in the Malaysian currency.   Â
Yet, the firm, now China’s sixth-biggest developer as sales have slumped this year, still has has nearly $2 billion of bond payments across different currencies due through rest of the year.Â
Any payment failures could impact China’s housing market even more than a landmark default in late 2021 by China Evergrande Group, as the builder has four times as many projects. Â
The votes ending later Monday could lead to separate decisions for each of the eight bonds. Seven of them were issued by unit Country Garden Real Estate and one by unit Guangdong Giant Leap Construction.
Below is a calendar of Country Garden bond principal and interest payments across currencies potentially due just in September:
–With assistance from Qingqi She.
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