The clock is ticking for Country Garden Holdings Co. to avert its first-ever public dollar bond default, as some creditors said they still hadn’t gotten an interest payment just hours before a deadline.
(Bloomberg) — The clock is ticking for Country Garden Holdings Co. to avert its first-ever public dollar bond default, as some creditors said they still hadn’t gotten an interest payment just hours before a deadline.
Two holders of Country Garden’s dollar bond due 2025 said they had yet to receive the interest as of 12:00 pm Hong Kong-time on Tuesday. They requested anonymity as they’re not authorized to speak publicly.
The builder, which has become a symbol of China’s broader property debt crisis, must pay the $15.4 million coupon by the end of a 30-day grace period Oct. 17-18 or a default can be called. Country Garden hasn’t clarified which day marks the official end of the grace period, amid uncertainty given the initial missed deadline of Sept. 17 fell on a Sunday, making the effective deadline Sept. 18.
The looming obligation marks the first major test for China’s former top developer after it warned last week that it won’t be able to meet all of its future offshore payment obligations. That was the strongest indication yet that it’s set for a debt failure and restructuring. The company has $9.9 billion of dollar notes outstanding, which would make it one of the country’s biggest ever restructurings.
Its payment struggles in recent months, along with peer China Evergrande Group’s deepening woes, are adding to signs that authorities’ rescue efforts are far from enough to stop the nation’s property crisis from intensifying.
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Country Garden has until now managed to dodge its first public bond payment failure and succeeded in rescheduling local debt in recent months. It said in a stock exchange filing last week that it had not made a due payment totaling HK$470 million ($60 million) “under certain of its indebtedness,” without specifying.
Country Garden didn’t immediately offer a comment when reached Tuesday.
An eventual default wouldn’t come as a surprise, given the developer’s dollar bonds are trading at deeply distressed levels around 4-6 cents on the dollar, indicating investors’ low expectations for debt recovery.
With $187 billion of total liabilities as of June 30, Country Garden is one of the world’s most indebted builders and will face another test on Oct. 27, when the grace period for a $40 million coupon on another dollar bond ends.
Potential delinquencies or a messy restructuring by Country Garden threaten to send China’s housing sector into deeper turmoil, as it has several times the number of projects run by Evergrande, whose default two years ago sent shock waves across Chinese markets.
Below are upcoming deadlines for Country Garden’s dollar bonds, including original payment due dates and grace periods:
–With assistance from Emma Dong.
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