Country Garden Faces New Round of Voting by Creditors

Introduction

Embattled developer Country Garden is facing a new round of voting by creditors to extend several debt maturities. This comes after the company avoided default at the last minute twice this month, providing some relief to the crisis-hit Chinese property sector.

Voting Details

• The voting is due to conclude by 10 p.m. Hong Kong time (1400 GMT) on Monday.
• Onshore creditors will decide on approving a proposal by Country Garden to extend repayments of eight onshore bonds by three years.
• This follows the approval given by creditors on September 1 to extend payments by three years for a 3.9 billion yuan ($533 million) onshore private bond.

Background

Country Garden, the largest private developer in China, has been facing liquidity pressure as sales have plunged. The company has debts worth 108.7 billion yuan ($14.9 billion) due within 12 months, while its cash level is around 101.1 billion yuan as of end-June.

Importance of the Vote

If Country Garden were to default, it would worsen the real estate crisis in China and put more strain on the struggling banks. This could also delay the recovery of the property market and the overall Chinese economy.

Analyst’s Perspective

Nicholas Chen, a Singapore-based analyst at research firm CreditSights, believes that Country Garden has shown a higher willingness to avoid default compared to its peers. He expects the company to continue striving to defer due bond payments on both onshore and offshore markets due to its inadequate liquidity position. Chen also suggests that Chinese regulators may be involved with the developer to mitigate potential contagion risks to other sectors and local governments.

Reporting by Xie Yu; Editing by Sumeet Chatterjee and Lincoln Feast.