Two sources have said that Country Garden has been granted permission from its creditors to extend the maturity of one more onshore bond. This comes as the Chinese developer fights to avoid defaulting on its debts amid Beijing’s increased attempts to stabilize the crisis-stricken property market.

According to two independent individuals acquainted with the situation, certain holders of Country Garden’s (2007. HK) offshore bonds are in discussions with the legal firm Ashurst to create a group to evaluate alternatives if the developer cannot satisfy the responsibilities related to debt repayment.

The difficulties experienced by Country Garden are the most recent to occur in the embattled property industry. This sector, once a pillar of development in the world’s second-largest economy but has become its worst drag since 2021 due to an unparalleled liquidity crisis, has been hammered hard by recent events.

The company’s interim financial documents reveal that Country Garden, one of the few significant Chinese developers that has not defaulted on loan commitments, has suffered liquidity strain due to the steep drop in sales.
Country Garden, China’s biggest private property developer, had 108.7 billion yuan ($14.9 billion) of debt due over the next 12 months. Still, as of the end of June, the company only had 101.1 billion yuan in cash.

According to the first two individuals, the most recent debt relief for the developer came in the form of creditors approving the maturity extension of one additional onshore bond by three years. These sources refused to provide their names since they were not authorized to communicate with the media.
Reuters’ request for comment to a spokesman for Country Garden was not immediately met with a response.

On Monday, Country Garden’s onshore creditors cast their votes in favor of requests made by the struggling developer to extend the repayment terms on eight onshore bonds totaling 10.8 billion yuan ($1.48 billion) for an additional three years.

According to a story published by Reuters on Tuesday, citing several sources, maturity extensions have been agreed for six of the eight Country Garden bonds. It is not clear at this time what the creditors will decide about the request to extend the maturity of the eighth bond.

Before ultimately finishing with a gain of 2.8%, shares of Country Garden initially increased by as much as 14% in Hong Kong on Wednesday, reaching their highest point since September 7th. A rise of 0.1% was seen in the Hang Seng Mainland Properties Index (.HSMPI).

This month, earlier than the current voting to extend the maturities of eight onshore bonds, Country Garden was able to escape default at the last minute twice, offering some respite to the devastated property industry. This vote was held before the latest voting.

The phrase “EASING CURBS.”
Despite the temporary respite from debt payments, investors are concentrating on the near-term sales prospects for Country Garden and its competitors due to the government’s recent rollout of several property assistance programs.

These initiatives included decreasing current mortgage rates and providing preferential loans for first-time home purchases in major cities; nevertheless, economists believe other steps are necessary to stabilize the sector, restore consumer confidence, and eventually induce a recovery.

Since 2021, when the government of China attempted to stop the country’s increasing debt, the real estate market in China has been in a state of crisis, and it has yet to witness a rebound in sales. The real estate market in China accounts for nearly a quarter of the country’s GDP.

According to Ting Meng, a senior credit analyst at ANZ, “Investors will monitor how quickly Country Garden can revive its sales going forward with Beijing easing the curbs on the property sector.” “Investors will monitor how quickly Country Garden can revive its sales,”

Because the developer would have difficulty making payments on its existing obligations with the available cash, she said the developer might shortly begin similar extension discussions with offshore creditors.

According to the sources, hedge funds specializing in distressed bond investments and restructuring have been engaged in the conversations with Ashurst. The sources refused to be identified since they were not authorized to speak to the media, but they did say that the hedge funds have been participating in the discussions.

According to one of the sources, several creditors have gathered informally to discuss the various possibilities. According to the information provided by the second source, certain offshore Chinese funds and affluent people who own Country Garden bonds also participate in the discussions with Ashurst.

According to the two sources, some bondholders in Country Garden are already discussing how the developer’s overseas assets may be leveraged if the company defaults on its debt.

A request for comment from Reuters was not met with a response from Ashurst. The Country Garden company did not want to remark.