China’s Country Garden proposes debt restructuring
China’s embattled property developer, Country Garden, has submitted preliminary terms of an offshore debt restructuring proposal to some creditors late last month, in an attempt to avoid liquidation. The proposal includes an updated cash flow forecast, as reported by sources familiar with the situation.
This projection shows Country Garden anticipating weaker cash flow in the coming years compared to earlier estimates shared with offshore creditors this year. Specific details of the revised cash flow projection remain undisclosed.
A spokesperson for Country Garden declined to Reuters request for comment on these developments.
The company, once China’s largest developer, defaulted on its $11 billion in offshore bonds late last year and is currently fighting a liquidation petition in Hong Kong. The next court hearing is scheduled for January 20, 2025.
This downward revision of the cash flow outlook comes amidst ongoing struggles within China’s property sector.
New home prices fell the most year-on-year in October since 2015, while property investment continues to decline, dropping 10.3 per cent in the first 10 months of 2024, recent data suggests little improvement on Friday.
The government has implemented various support measures, including tax incentives for lower home purchase costs and benchmark lending rate cuts in October.
In a July hearing, Country Garden informed the Hong Kong High Court of its intention to publish debt restructuring terms for its offshore creditors in September and seek court approval for the arrangement early in 2025. However, the company missed the September deadline.
Gaining support from key creditors for the revised restructuring proposal before the January court hearing would be crucial for Country Garden. This support would allow them to seek an extension from the court to execute the restructuring plan.
PJT Partners, a financial advisor representing the main group of Country Garden’s offshore bondholders, declined to Reuters request for comment on these discussions.
Ever Credit Limited filed the liquidation petition against Country Garden in February for non-payment of a $205 million loan.
Recent weeks have seen active discussions between Country Garden and some of its offshore creditors regarding the restructuring framework, including potential “haircuts” for bondholders and debt-to-equity swaps.
The company’s shares have been suspended from trading since April pending the release of 2023 full-year and 2024 interim results. A recent exchange filing revealed a 31 per cent decline in contracted sales for October, dropping to around 4.33 billion yuan.
China’s property sector has been grappling with a debt crisis since mid-2021, leaving millions of homes unfinished across the country.
Many developers are facing liquidation lawsuits, with Sino-Ocean Group being the latest addition to this list. A handful of developers have already been ordered into liquidation, including industry giant China Evergrande Group.
Attribution: Reuters
Subediting: M. S. Salama
