February 8, 2025
Country Garden loan deal, relief from China property aid measures start rally – Reuters

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HONG KONG/NEW YORK, Sept 4 (Reuters) – Country Gardens (2007.HK) struck a deal with creditors to extend a 3.9 billion yuan ($537 million) onshore debt payment, sending the developer’s shares higher on Monday and China was thrown into jeopardy. The property sector is in dire need of some relief.

Shares of Country Garden jumped as much as 19% to their highest since August 10 and were set for their biggest one-day percentage increase since November. Hong Kong’s Hang Seng Mainland Property Index (.HSMPI) rose more than 9%.

But while the company’s investors may be heaving a sigh of relief, it remains to be seen whether government stimulus measures will soon help revive demand, ease the sector’s cash crunch and address gloom over the wider financial system.

Beijing on Monday approved the establishment of a special bureau to promote the development and growth of the private economy in a series of policy measures it has taken in recent months to revive the world’s second-largest economy.

The private sector accounts for 80% of new urban jobs, but has struggled to attract investment amid a weak economic recovery in the first half of the year, with business owners constrained by weak domestic demand.

Country Garden’s worsening financial woes have further exposed the fragile state of the country’s real estate industry, which accounts for nearly a quarter of the economy and is due for a severe debt crisis by 2021.

Considered financially sound compared to peers, China’s top private developer had not shed debt payment obligations, onshore or offshore, until coupon payments on dollar bonds last month tightened its cash flow after a slump in domestic demand. didn’t impress.

Since then, the Chinese authorities have taken a number of measures, the most important being lowering existing mortgage rates and offering preferential loans for first-time home buyers in major cities.

Tara Hariharan, Managing Director, Global Macro, said, “We will see in the coming months whether these supply-side measures are able to revive home buying demand, given the fortunes of China developers and their ability to handle upcoming debt maturities. be important for.” Hedge fund NWI Management in New York.

He said that Country Garden and other developers would face payment for huge maturity dues this year.

In the settlement reached after voting on its proposal late Friday, Country Garden is now allowed to repay the onshore loan in installments over three years, instead of meeting its obligations by September 2.

The company logo of Chinese developer Country Gardens is pictured at the Shanghai Country Garden Center on August 9, 2023 in Shanghai, China. Reuters/Eli Song/File Photo Get Licensing Rights

restructuring talks

Country Garden has also defaulted on an interest payment linked to a 100 million Malaysian ringgit ($21.5 million) bond, which was due on Sept. 2, a source familiar with the matter said, in another sign the company is missing the payment deadline. Striving to meet and avoid default.

The source asked not to be named because of the sensitivity of the matter.

The developer also has another looming debt payment challenge – the grace period for last month’s missed coupon payments totaling $22.5 million on two offshore dollar bonds expires on Tuesday.

Its three offshore creditors said it was able to prevent an onshore default with the expansion deal, raising hopes it will be able to make interest payments on those bonds.

The bondholders declined to be named because they were not authorized to speak to the media.

After making interest payments, creditors said they expected Country Garden to enter restructuring talks for its entire offshore debt to avoid a “hard default”, as it had done with onshore creditors.

Country Garden did not immediately respond to a request for comment.

While there has been some respite for China’s property industry, some market participants said they plan to stay away from the sector till home sales pick up.

“We sold all our Chinese real estate stocks in April 2020 and haven’t bought back any since,” said Qi Wang, CEO of Hong Kong-based MegaTrust Investments. “Won’t touch private developers with a 10-foot stick right now.”

($1 = 7.2606 Chinese Yuan = 4.6540 Ringgit)

Reporting by Zi Yu in Hong Kong, Carolina Mandel in New York and Joe Cash in Beijing; Written by Sumeet Chatterjee; Editing by Edwina Gibbs and Lincoln Feist

Our Standards: The Thomson Reuters Trust Principles.

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