Chinese developer Country Garden faces a new deadline for overseas payments

HONG KONG (Reuters) – Chinese property developer Country Garden (2007.HK), which defaulted on two dollar interest installments last month, faces another deadline on Monday with two coupons worth a total of $66.8 million due.

Coupons due Monday are linked to Country Garden’s bonds at 6.5% April 2024 and 7.25% April 2026 rates.

The payments have a 30-day grace period, but the developer faces a big test later this month, when all of its foreign debt could be deemed in default if it fails to pay a $15 million September coupon by October 17.

China’s largest private developer holds external bonds worth $10.96 billion and non-yuan-denominated loans worth 42.4 billion yuan ($5.81 billion). If you default, these debts will need to be restructured, and the company or its assets are also at risk of liquidation by creditors.

China’s real estate sector has been under a debt crisis since 2021. Companies representing 40% of Chinese home sales – most of which are private real estate developers – have defaulted on debt obligations, leaving many homes unfinished.

More than two years later, the crisis has worsened as confidence in the housing and capital markets dried up, putting further pressure on developers’ liquidity.

Beijing has introduced a set of support measures in recent months to revive the sector, which constitutes about a quarter of the world’s second-largest economy.

But some analysts say more action is needed.

In a research note on Friday, UBS said property sales growth in major cities is likely to remain weak in September, indicating a limited recovery in sales despite more supportive measures to ease the property crisis.

The market is closely watching whether Country Garden, which has projects across the country, is able to avoid another default by making last-minute payments.

In September, Country Garden received approval from its internal creditors to extend yuan bond payments, and in the same month it made coupon payments in offshore markets in the final hours of the end of the grace period.

But the developer has yet to pay a $15 million coupon due on September 17 and another $40 million coupon due on September 27, both of which have 30-day grace periods.

($1 = 7.2951 Chinese yuan)

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