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Hong Kong CNN –
Investors in beleaguered Chinese property giant Country Garden heaved a collective sigh of relief on Monday after it reportedly got approval from local creditors to delay repayment on maturing bonds, averting the risk of default Is – at least for a few days.
This was the first loan extension secured by the company after the liquidity crisis became public last month. It provides a temporary reprieve for China’s real estate industry, which has been grappling with fears that Country Garden’s debt crisis will spread to its peers, causing further turmoil in the economy.
The company has not responded to CNN’s request for comment.
But the company has not budged from the toss. It failed to pay the outstanding interest on two dollar bonds last month and a 30-day grace period on those missing payments expires this week. Failure to pay those creditors could still lead to default.
On Monday, Country Garden’s stock rose 15% in Hong Kong after multiple reports that bondholders had agreed to a plan for the company to increase payments for 3.9 billion yuan ($540 million) of bonds it sold to investors in China , which matured on Saturday. It posted its biggest daily gain in nine months, but remains down 62% so far this year.
Hong Kong’s Hang Seng (HSI) index rose 2.5% and had its best day in more than a month on the back of a boom in the property sector. Shares were also boosted by a fresh batch of stimulus measures announced last Thursday to boost the property market. Hong Kong stocks were closed last Friday because of the storm.
According to the settlement with creditors, which was reported on Saturday by several state-owned media outlets, Country Garden will now be able to stretch payments of the outstanding principal amount of $540 million until 2026. But interest payments on bonds must be made as originally scheduled.
The bonds were issued in September 2016 with an issue amount of 5.83 billion yuan ($800 million) and a coupon rate of 5.65%, according to an offering document seen by CNN.
According to state-owned Southern Media Group, more than 56% of affected bondholders, including major state-owned banks and private equity funds, voted in favor of the agreement.
“The deal means principal payments on about 70% of the bonds will be delayed by three years, which could significantly ease pressure on Country Garden and its long-term debt service ability,” analysts at Huatai Securities wrote in a Sunday research note. could be improved.”
He said this particular bond had the largest outstanding amount that the company needed to pay in the coming year among its onshore debt.
But, IG market analyst Yep Jun Rong said past lessons from property developer China Evergrande’s 2021 default showed any extension could only be “a near-term respite”, with no final resolution to its debt crisis. There is still a “paradox” for investors with scarcity.
Country Garden, which was China’s biggest residential developer by sales last year, is grappling with a cash crunch.
Last week, it reported a record loss of $7 billion in the first six months of the year, citing a continuing slump in the property market and a difficult refinancing environment. It confirmed that it had missed payments to holders of some of its offshore bonds last month and that the company could default if its financial condition continues to worsen.
The total liabilities on the company are about $ 200 billion and the pressure to repay the debt is increasing.
According to Moody’s, it has about 31 billion yuan ($4.3 billion) in bonds that are due to mature by the end of 2024.