The grace period for payment of the voucher by China Country Park has expired

HONG KONG, Oct 18 (Reuters) – The grace period for Country Garden’s (2007.HK) $15 million voucher has expired without any news of payment, fueling speculation that China’s largest private property developer has defaulted on its foreign debt as the country’s real debt. Real estate problems deepened.

Failure to pay could trigger defaults on other Country Garden Notes as is common with note contracts. The company holds nearly $11 billion in offshore bonds, and a default would pave the way for one of China’s largest corporate debt restructurings.

One bondholder for the tranche in question, who declined to be identified to discuss confidential information, said he had not received a coupon payment as the grace period expired.

Country Garden reiterated on Wednesday that it expects it will not be able to meet all of its external debt obligations and hopes to seek a “comprehensive” solution to its difficulties.

Its statement did not directly address the issue of whether there was a default and company representatives declined to comment.

“If they don’t pay within the grace period, it will be a default,” said Cédric Raymond, an analyst at GimmeCredit, an independent corporate bond think tank, referring to Country Garden’s missed payment.

Dozens of other Chinese property developers have defaulted, suffering liquidity problems since 2021 when the government took measures to rein in extremely high debt levels in the sector.

The industry accounts for a quarter of China’s economic activity, and its long-standing problems have affected the world’s second-largest economy, often rattling global financial markets.

The missed payment to Country Garden follows an investigation into the chairman of embattled China Evergrande (3333.HK), which also defaulted and was at the heart of the sector’s debt crisis.

Shares in Country Garden have lost about 70% of their value this year but gained some ground on Wednesday, rising 2.7%.

Bondholders say they expect debt to be restructured.

“We are ready to shake off some losses, but we just hope that the restructuring process will be effective and less painful compared to other companies like Evergrande,” said a US asset manager who holds Country Garden dollar bonds, who requested anonymity.

However, Country Garden is in a better position with its internal debt, having gained some breathing room through three-year repayment extensions on eight bonds worth 10.8 billion yuan ($1.5 billion).

China has launched a series of support measures in recent months to revive the property market, but private developers are still struggling to obtain new capital, according to a CreditSights report published on Tuesday.

The report said: “As homebuyers continue to be biased towards state-linked developers, privately run developers who have not yet defaulted are likely to find survival increasingly challenging, as they are pressured by insufficient contracted sales generation and lack of access. To financing.

The bleak outlook for China’s real estate market is likely to worsen the terms that external creditors may have to accept as debt is restructured.

Data on Wednesday showed that real estate investment in China fell by 9.1% during the first nine months of the year. Sales by floor area decreased by 7.5%.

National new home prices for September will be announced on Thursday.

Developers, who account for 40% of Chinese home sales, have defaulted on their debt obligations since 2021, according to JPMorgan. These companies, most of them private, have issued about $110 billion worth of high-yield offshore bonds.

Hong Kong’s Hang Seng Mainland Property Index (.HSMPI) is down 40% so far this year.

($1 = 7.3110 Chinese yuan)

Our standards: Thomson Reuters Trust Principles.