Country Garden’s Next Major Debt Test Looms Monday as Vote Ends

2023-09-06 06:52:35.511 GMT
By Bloomberg News

Chinese developer Country Garden Holdings Co. faces its next major test Monday when creditors finish
voting on company requests to extend more bonds, just days after
dodging a default with last-minute payments.

Voting starts Sept. 7 and concludes Monday Sept. 11 on the builder’s proposal to extend principal payments for a group of yuan bonds by three years. The most urgent focus among them is a 1.435 billion yuan ($196.3 million) note with a put option Sept. 14 allowing investors to demand repayment.

Country Garden has left much smaller payments go right up until final deadlines recently, including the combined $22.5 million in interest it paid within a grace period ending Sept. 5-6. One of the world’s most indebted builders, it’s also warned
that it may default.

That all means a lot is riding on the outcome Monday of the extension vote, given any failure to win approval could leave it staring down one of its most sizeable repayments in months just next Thursday. There’s also an even bigger 2 billion yuan bond puttable Sept. 24 among the securities on the ballot for extension. 
 
And that’s not all. The company also faces deadlines Sept. 14-19 for a combined equivalent of $31.6 million of interest on three offshore bonds and two yuan notes.

“Country Garden remains at very high risk of future defaults, and every future coupon payment date is a risk event,” wrote Leonard Law, senior credit analyst with Lucror Analytics on Wednesday. “The company will have to seek an extension or restructuring for its offshore debt maturities going forward.” The property firm didn’t offer a comment when reached. Country Garden is a household name in China, known for building homes in smaller cities. But its size and fame haven’t kept it from getting deeply entrenched in a broader liquidity crisis in the nation’s property market that shows few signs of a sustained turnaround.

Although there have been periods over recent months of some recovery in home sales after the government relaxed certain property policies, authorities have been reluctant to deploy any major stimulus.

The largest portion among bond interest falling due in less than two weeks is a $15.4 million coupon on a dollar bond. That interest payment should be by Sept. 17 but effectively comes due Sept. 18, the next business day. There’s a 30-day grace period.

Country Garden’s dollar bonds, which traded around 60 cents near the beginning of the year, have collapsed to as low as 9 cents, deeply distressed levels.

Several months down the line, the next biggest principal maturity is a $1 billion dollar note that matures Jan. 27. It has no grace period and could constitute a default right away if missed, a prospectus shows.