Country Garden, one of China’s biggest indebted property developers, is negotiating with its creditors on Friday to reschedule its payments and avoid a default, which would have catastrophic consequences for the world’s second-biggest economy.
The group, long considered financially sound, was unable to repay two interest on its loans earlier this month as the real estate sector is experiencing an unprecedented crisis in China. Country Garden formally risks default if it doesn’t pay, after a 30-day grace period that expires in early September.
Avoid a payment default
To make matters worse, it must also pay an obligation for a total amount of 3,900 million dollars (3,600 million euros), which expires in ten days. The promoter, which hopes to postpone this deadline until 2026, has been speaking with creditors since Wednesday. They have until 10:00 p.m. (2:00 p.m. GMT) to vote in an online vote, according to Bloomberg.
A deal would allow Country Garden to avoid a default, which would be the biggest in China since rival Evergrande’s two years ago. Country Garden’s situation is causing nervousness in the markets because the group had considerable debt at the end of 2022, which was estimated at around 1,152 million yuan (150 million euros). Bloomberg, for his part, estimates it at about 1,400 billion yuan (176 billion euros).
The largest promoter in China.
Country Garden was the biggest promoter in China last year. It has four times as many projects as Evergrande, whose construction shutdown sparked protests and monthly payment strikes last year. Country Garden employs tens of thousands of people and is listed on Forbes’ list of the world’s 500 largest companies. His boss, Yang Huiyan, was until recently the richest woman in Asia.
The setbacks for the two real estate giants are further weakening a sector already scalded by the health crisis and the economic slowdown in China. To revive this key sector of the economy, China on Friday announced new measures to ease mortgage lending.
Source: BFM TV
