This article is from the Australian Property Journal archive
CHINESE developer Country Garden has been deemed to be in default on a dollar bond for the first time, as the country’s troubled property industry lurched further into crisis.
Country Garden failed to pay the US$15.4 million interest on a US$500 million note due in 2025. The deadline – which included a 30-day grace period after it missed the initial deadline in September – passed last week..
The event “constitutes an event of default,” according to a notice to holders from trustee Citicorp International seen by Bloomberg News.
According to Reuters, two bondholder groups have been seeking discussions about a potential debt restructuring package.
Country Garden recently said it expects it will “not be able to meet all of its offshore payment obligations when due or within the relevant grace periods”, its sales were “under remarkable pressure”, and available funds had declined further. It posted a US$6.72 billion first-half loss and now has US$200 billion in liabilities.
Country Garden has just furthered its Australian asset sell-down with the divestment of Melbourne estate Windermere for a reported near-$250 million.
Reports this month of its founder Yeung Kwok Keung and chairperson Yang Huiyan, his daughter, leaving the country prompted Country Garden to state on its WeChat account that the pair were “at work as usual”.
China’s property sector has been reeling since Evergrande, dubbed the world’s most indebted developer, defaulted on debts two years ago following Beijing’s “three red lines” crackdown on the amount large developers could borrow.
The result has been a number of other developers defaulting on their debts, leaving countless homes across the country unfinished, while people who have purchased their homes off-the-plan refusing to make mortgage payments.
Restructuring of Evergrande, which still has US$327 billion in debts, has begun to falter. Evergrande has said that it cannot issue new debts to restructure its offshore liabilities due to the investigation into its Hengda Real Estate Group. Its billionaire founder and chairman Hui Ya Kan has been detained by Chinese police and put under surveillance, while it was reported that he is being investigated over allegations that he attempted to assets offshore while the company struggled to finish projects.
