Country Garden (2007) yesterday admitted that its usable cash has declined, showing "periodic liquidity stress," after failing to pay two US dollar bond coupons worth US$22.5 million (HK175.5 million).
Shares of the mainland real estate giant plummeted 14.4 percent in Hong Kong yesterday, making it the worst-performing blue-chip stock, while Country Garden Services (6098) fell nearly 9.7 percent.
The developer said it has not paid two US dollar bond coupons due on August 6, confirming market fears that the biggest privately owned developer in China is slipping into repayment troubles.
The company owed US$10.5 million of interest on a dollar bond that matures in 2026 and US$12 million on a note due 2030, according to data compiled by Bloomberg.
Both bonds have a 30-day grace period before a missed coupon payment can constitute a default.
Country Garden was once the country's largest builder by sales, but it has fallen to sixth, underscoring how even the strongest firms are struggling after a years-long crisis. It's one of the few major Chinese developers yet to default, and a failure to pay its debts would pummel fragile market confidence just as Beijing seeks to revive the troubled property market.
While the central bank pledged more support last week, investors remain uncertain over the pace and extent of policy action and have been reluctant to back fund-raising attempts.
"It seems like more investors are betting on Country Garden's liquidity concerns leading to its failure," said Patrick Wong, a Bloomberg Intelligence analyst. The firm "has a sizable amount of projects, so any default will significantly affect the overall property market sentiment and hit other developers."
Country Garden, which had total liabilities of 1.4 trillion yuan (HK$1.52 trillion) at the end of 2022 and large exposure in lower-tier cities, told Reuters that it is improving capital arrangements to ensure the legal rights of creditors. It added its usable cash had declined, showing "periodic liquidity stress," due to a deterioration in the sales and refinancing environment, and the impact from various fund regulations.
"The company has been holding fast, but it's hard to see the dawn light," it said, highlighting efforts to ensure home deliveries and debt repayments as the industry grapples with "unprecedented difficulties".
The developer says it’s hard to see the dawn. Bloomberg
