Distressed Chinese developer Country Garden Holdings Co. won creditor support to extend repayment on 10.3 billion yuan ($1.4 billion) of local bonds, a significant respite that cuts debt due in coming months.
(Bloomberg) — Distressed Chinese developer Country Garden Holdings Co. won creditor support to extend repayment on 10.3 billion yuan ($1.4 billion) of local bonds, a significant respite that cuts debt due in coming months.
Holders of the securities voted in favor of the company’s plan to stretch principal repayments by three years, people familiar with the matter said, asking not to be identified discussing a private matter. The result leaves just about 2 billion yuan of principal and interest for local notes with maturities or put options remaining in 2023. Chinese property developer shares jumped, with Country Garden up 6.5%.
The seven notes are among a group of eight bonds the company was seeking approval to extend in voting that started Sept. 7. Voting on the eighth note, from unit Guangdong Giant Leap Construction, was extended to Thursday 10 p.m. Beijing-time, according to a holder who said he was given the information by a company representative. That security has 492 million yuan of outstanding principal, and matures Oct. 21, according to data compiled by Bloomberg.
Country Garden’s victories, however, don’t alleviate looming longer-term challenges. Helmed by one of China’s richest women, Yang Huiyan, the firm has become a symbol of a broader property debt crisis that’s led to record defaults and prompted authorities to adjust policy to avoid more contagion. It still needs to repay interest due on the yuan notes, including a 62.1 million yuan coupon due Thursday. The builder also faces several offshore bond interest payments before its next major test when a $1 billion bond matures in January.
The firm has so far avoided defaulting but recently warned it still could, after posting a record first-half loss of almost $7 billion. In a sign of how seriously bond traders are taking that risk, the company’s dollar securities have continued to hover at deeply distressed levels from about 9 to 14 cents.
The outstanding principal of all eight yuan securities in the votes totals 10.8 billion yuan, including the seven that have been extended which were issued by unit Country Garden Real Estate.
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 deeper into crisis from last month, when it missed the initial deadline on that dollar note interest, has shocked China’s financial markets. The firm is a household name, known for building homes in smaller cities.
The developer didn’t immediately offer a comment when reached Wednesday.
The voting outcome adds to more positive news in recent days, even as Country Garden is far from out of the woods. Along with other developers whose shares have traded at or near penny-stock levels, it has extended gains in the stock market this 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
Still, any future failures to honor debts 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.
Cailian reported earlier that Country Garden had won approval to extend one of the yuan bonds. Reuters reported Tuesday that it had gotten approval to extend six of the securities.Â
–With assistance from Pearl Liu and Charlotte Yang.
(Updates with further details throughout.)
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