China’s largest developer Country Garden is again close to default – Kommersant

China’s largest developer Country Garden Holdings announcedwhich may fail to pay debts on issued bonds on time or during grace periods, which will automatically lead to default on them.

The company said that in the first nine months of this year it delivered 51.12 million square meters. m of housing, which makes it a leader in the Chinese market. However, sales during this period were 43.9% and 65.4% worse compared to 2022 and 2021, respectively. The statement notes that the developer’s cash outflow has been steadily increasing in recent years and the company is now experiencing serious problems with cash reserves, and market conditions do not allow it to solve these problems.

Country Garden noted that it currently has HK$470 million ($60.1 million) in outstanding payments. “The Company also expects that it will not be able to satisfy all of its offshore payment obligations when due or during applicable grace periods, including, but not limited to, obligations under US dollar notes issued by the Company. Such failure to pay may result in the relevant creditors of the group requesting acceleration of payment of the relevant debts due to them or resorting to enforcement action,” the statement said.

This is Country Garden’s second warning in recent months. At the end of August, the company reported that it missed the payment of $22.5 million on two issues of its dollar bonds, which were due on August 7. The grace period for paying income to bondholders ended on September 5–6, after which a technical default could have occurred, but Country Garden managed find funds to pay creditors and avoid default.

Country Garden’s total debt is about $187 billion. In the first half of the year alone, the company’s loss amounted to 51.5 billion yuan ($7 billion). Country Garden attributed the losses to “the depth and breadth of the downturn in the Chinese real estate market, particularly in smaller Chinese cities,” for which it was “unprepared.”

Read about the problems of another Chinese developer, Evergrande in the material “Kommersant”.

Kirill Sarkhanyants