[1/2]A worker looks at a construction site for residential buildings by Chinese developer Country Garden, in Beijing, China on August 11, 2023. REUTERS/Tingshu Wang/File Photo Obtaining licensing rights
HONG KONG, Oct 18 (Reuters) – The grace period for a $15 million coupon payment to Country Garden Holding (2007.HK) has expired, raising expectations that China’s largest private property developer has defaulted on its foreign debt.
One of the tranche’s bondholders, who declined to be identified to discuss confidential information, said he had not received a coupon payment as the grace period expired.
Country Garden did not immediately respond to a request for comment.
Defaulting on a bond payment due in September 2025 without an agreement with creditors means Country Garden has joined dozens of other Chinese developers who have defaulted, deepening the crisis ravaging the real estate sector, which makes up about a quarter of the world’s second-largest economy.
The company warned last week of its inability to meet external debt obligations, saying this was included “within the relevant grace periods” and adding non-payment could result in creditors being required to accelerate repayment or pursue enforcement action.
With nearly $11 billion in offshore bonds, a Country Garden default would pave the way for one of China’s largest corporate debt restructurings.
Country Garden has also dropped other third-party payments in the past few weeks, although these have yet to see 30-day grace periods.
However, the company is in a better position with respect to its internal debt, having gained some breathing room through repayment extensions.
Sources said that last month, it obtained creditors’ approval to extend the repayment of local bonds, the last in a group of eight bonds that it was seeking to extend.
The eight bonds worth 10.8 billion yuan (1.48 billion US dollars) were extended for three years.
A CreditSights report published on Tuesday found that state-linked Chinese developers still have access to financing markets while private companies struggle to obtain new capital.
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.
A default would open the way for Country Garden’s external creditors to begin negotiations with the company’s financial advisors. The restructuring process may take several months due to the size of the debt.
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)
(Reporting by Claire Jim and Xie Yu in Hong Kong – Preparing by Mohammed for the Arabic Bulletin) Writing by Scott Murdoch. Edited by Sonali Paul and Edwina Gibbs
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