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China’s Country Garden warns it could fail to pay looming offshore debt obligations


HONG KONG: China’s Country Garden Holdings said it might not be able to meet all of its offshore payment obligations when due or within the relevant grace periods, as the country’s largest private property developer grapples with debt restructuring.

“Such non-payment may lead to relevant creditors of the group demanding acceleration of payment of the relevant indebtedness owed to them or pursuing enforcement action,” the company said in a Hong Kong Stock Exchange filing on Tuesday (Oct 10).

The group is currently facing “significant” uncertainty regarding disposing of its assets and its cash position remains under pressure, Country Garden added.

A growing number of Chinese property developers have defaulted on debt obligations since a liquidity crisis hit the sector in 2021. The crisis has been worsened by demand declining in China’s property market in line with a broader economic slowdown.

Country Garden was due to pay on Monday US$66.8 million in coupons on 2024 and 2026 bonds, although the payments have a 30-day grace period.

The developer faces another big test later this month when its entire offshore debt could be deemed in default if it fails to pay a US$15 million September coupon by Oct 17.

Country Garden has US$10.96 billion offshore bonds and 42.4 billion yuan (US$5.81 billion) worth of loans not denominated in yuan. If it defaults, these debts will need to be restructured, and the company or its assets also risk liquidation by creditors.

The company recorded contracted sales of around 154.98 billion yuan for the nine months till September, a drop of about 43.9 per cent and 65.4 per cent, compared with corresponding periods in 2022 and 2021.

It said it had appointed investment bank Houlihan Lokey, China International Capital Corporation (CICC) and law firm Sidley Austin as advisers to examine its capital structure and liquidity position.

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