Country Garden, one of China’s largest property developers, issued a cautionary statement on Tuesday, indicating its incapacity to meet its obligations related to offshore debt, potentially becoming another Chinese real estate developer to default and contributing to what could be one of the most substantial debt restructurings in the nation’s history. The prominent property firm has encountered difficulties in repaying a loan and is unable to fulfill all of its international debt responsibilities.
Country Garden, a Chinese property development firm, ranked 206th in Fortune Global 500 list of 2023. As of 2018, it had a market valuation of around US$29.84 billion, and its worldwide project portfolio includes 187 high-end township developments in China, Malaysia, and Australia.
Country Garden has warned investors for the second time in less than two months that it may default on its $190 billion debt, highlighting the fact that China’s real estate crisis is far from over. The ailing developer, formerly China’s largest, is dealing with a liquidity problem and has avoided three defaults in the last month. However, continuing property market instability and a tough refinancing environment have hampered its ability to acquire enough cash to service its billions of dollars of debt.
Country Garden has approximately $200 billion in liabilities, with nearly $11 billion in offshore bonds denominated in dollars. While it has not yet defaulted, the company has failed to make coupon payments on certain dollar-denominated bonds since the previous month. Furthermore, it is approaching the expiration of 30-day grace periods for meeting its payment obligations starting next week.
Since a liquidity crisis hit the industry in 2021, most of the private property developers and companies that account for 40% of Chinese house sales have defaulted on loan commitments, leaving many homes incomplete. Several developers that have defaulted on their obligations, such as China Evergrande Group, are encountering petitions for liquidation. To date, only a few of them have been directed by foreign courts to undergo the liquidation process.
Kaisa Group, a smaller peer, has indicated that if it is compelled to go through liquidation, its creditors would recover less than 5 percent of their owed funds. This information was shared by a lawyer representing one of the creditors, Broad Peak Investment, which has submitted a winding-up request against Kaisa Group in a Hong Kong court on Tuesday.