World’s Onetime Youngest Female Billionaire Sees Fortune Plummet Amid Deepening Debt Crisis

Published 10 August 2023, 08.40 am EDT

Yang Huiyan has seen her wealth plunge by a whopping $25 billion over the past two years, as shares of Country Garden have slumped to an all-time low on declining profits and a mounting debt crisis. The 41-year-old chairman still has a net worth of $4.6 billion, but it’s a dramatic reversal of fortune for Yang who had been crowned the world's youngest female billionaire when she debuted on the wealth rankings in 2007 at the age of 26.

Yang’s wealth, which peaked at $29.6 billion in 2021, is derived mostly from her 57% stake in the company, whose shares lost a third of their value this week on news that the property developer had missed interest payments of $22.5 million on two U.S. dollar bonds.

Country Garden still has a grace period of 30 days on the payments that were due on August 6, but the company has already started preparations for an eventual debt restructuring, according to local news out Yicai. A Country Garden spokesperson said she has no comment on the report, but an earlier statement to Forbes said that Country Garden’s usable cash had declined due to falling sales, changes to the refinancing environment and the impact from various fund regulations.

“Country Garden’s ability to pay remains very uncertain at this point,” says Nicholas Chen, a Singapore-based analyst at research firm CreditSights. "You can be a 'high quality' developer but still run into trouble, like what had happened to some of its peers previously."

Long considered a top-tier player in China’s real estate market, the company had previously set itself apart as one of the few remaining property developers that was able to meet its debt obligations. But now the pressure is on Yang to see whether she can scrape together enough cash to repay debt, which includes roughly $4.3 billion in onshore and offshore bonds that are due in 2024. That figure includes bonds which are puttable by investors, meaning they have the right to demand payment from Country Garden.

Already one of the company’s offshore bonds maturing in January 2024 has plunged to less than 10 cents on the dollar, suggesting that investors are pricing in an imminent default, according to prices compiled by Shanghai-based financial information platform Dealing Matrix. Moody’s Investors Services downgraded Country Garden three notches deeper into junk on Thursday, citing reasons including deteriorating liquidity and heightening refinancing risks.

And the company warned in a late Thursday stock exchange filing that it’s facing a net loss for the first half of 2023 of up to $7.7 billion, compared with a profit of $265.7 million generated during the same period a year ago.

“Since 2021, the industry has entered an unprecedented difficult period with multiple unfavorable factors, resulting in severe difficulties and challenges for industry sales and open market financing,” the troubled developer said in the filing.

Last week, the company cancelled a planned $300 million share sale for unspecified reasons. Jeff Zhang, a Hong Kong-based analyst at research firm Morningstar, says Country Garden may have done so over concerns about its share price, which has more than halved this year and has been downgraded by analysts at JP Morgan Chase & Co. due to mounting liquidity concerns. Last year, when it raised funds through the same channel, shares had to be sold at a steep discount to its market price.

The developer has been particularly hard hit because roughly two-thirds of its projects by market value are located in lower-tier cities, where property prices aren’t as resilient amid the weakness in China’s wider economy, as well as mounting signs of deflation. Contracted sales declined by an estimated one-third to $18 billion in the first half of this year, followed by a 60% drop to $1.7 billion in July, according to Moody’s.

The agency said in its Thursday research note that the missed coupon payments would further hurt market confidence and restrain its funding access. Since Yang became chairman, Country Garden has only had access to limited funding streams. The developer received $115 million in April in financing from Flow Capital and another $35 million in July from Chong Hing Bank. It also managed to sell its bonds onshore, where a unit issued $236.8 million worth of medium-term notes in May.

Still, liquidity has been under “a lot of pressure,” and “we can’t rule out the default,” says Warut Promboon, a Hong Kong-based managing partner at research firm Bondcritic. Ultimately, survival “depends on upcoming support from the government and state-influenced banks,” he says.

It is now up to the billionaire, who graduated from Ohio State University with a bachelor’s degree in marketing and logistics, and who has long been groomed to succeed her father, to make that happen. Her 35-year-old sister, Yang Ziying, also sits on the board, while the billionaire’s husband, Chen Chong, is a non-executive director.

Together, they are responsible for steering a business the elder Yeung founded in 1992, and grew by offering residences outside major urban centers. Country Garden’s strategy enabled it to grow quickly with lower costs in terms of acquiring land sites. After taking over, his daughter donated $826 million worth of shares in a property management arm, Country Garden Services Holding, to a family charity. The Hong Kong-listed unit has fallen by almost two-thirds so far this year.

The main property operation, in the meantime, has said it will “actively seek guidance and support from the government and regulatory authorities,” according to a separate filing made in late July. It will also consider adopting measures such as cutting operating expenses and accelerating loan collection to protect cash flow, according to the filing.

But Country Garden doesn’t appear to be included in a list of developers that recently met with newly appointed central bank governor Pan Gongsheng, who said authorities would increase funding support for the private sector. It also didn’t appear to be invited to a meeting that securities regulators held with real estate companies on Friday either, according to Bloomberg.

Optimists argue that the developer is still considered systematically important due to its size, and Beijing may now have more incentive to stabilize the real estate sector amid a wobbly economic recovery.

But many other large developers, such as China Evergrande Group, have already defaulted on earlier debt obligations. In fact, even the state-linked real estate companies, like Sino-Ocean Group Holding, have recently missed payments and are working on an extension plans.

Shen Meng, managing director of Beijing-based boutique investment bank Chanson & Co., says there is a possibility that officials might pressure Yang to use her own money to pay down the company’s debt. And an investor holding Country Garden’s bonds, who requested anonymity to discuss the matter, said the company had communicated little with offshore bondholders thus far, including the type of support it may receive.

Amid the uncertainties, Yang has pointed to another strategy. When releasing its 2022 annual results, the company vowed to increase its landbank in tier-1 and tier-2 cities to about half of the total by value over the next three to five years.

But analysts say that would be easier said than done, as expanding in places like Beijing and Shanghai would pit the now weakened Country Garden against still powerful state-run rivals in a fiercely competitive market. Ruiying He, an analyst at Singapore-based research firm Lucror Analytics, says Country Garden’s “survival in the current form” would depend on a major improvement in sales and access to capital markets.

“Support in funding access seems to be more crucial for now,” she says. “It is hard to believe that Country Garden can change its business model or landbank structure overnight.”

By Yue Wang