Country Garden, one of the largest real estate groups in China, in a precarious financial situation, obtained a new reprieve from its creditors in rescheduling a payment, the financial agency Bloomberg reported on Tuesday. The developer, which has long been considered financially sound, has been caught in recent months by the real estate crisis in China, which now threatens the survival of many of its competitors. He is now trying to avoid a default whose consequences would be catastrophic for the Chinese real estate sector.
According to two creditors cited anonymously by Bloomberg, the group’s proposal to reschedule a payment of 492 million yuan (63 million euros) was accepted. The deadline to vote on this proposal had been postponed three times and the last deadline expired on Monday at 10:00 p.m. (2:00 p.m. GMT). With this new green light obtained, Country Garden will have managed to reschedule nine bond issues this month for a total amount of 14.7 billion yuan (1.9 billion euros), according to Bloomberg calculations.
A credit rating downgraded by rating agency Moody’s
Country Garden remained China’s largest property developer last year. Any unpaid debt would send a shock wave through the markets and plunge a real estate sector already affected by the health crisis and the economic slowdown in China even further into stagnation. Country Garden had a considerable debt estimated at 1,430 billion yuan (180 billion euros) at the end of 2022. At the end of June it had 147.9 billion yuan (18.6 billion euros), a sum intended mainly to complete the homes already paid by the owners even before its construction.
Ratings agency Moody’s downgraded its credit rating this month, now judging its bond issues as “highly speculative” and at risk of default. Real estate groups in China have been betting on this financing model for a long time. But its huge debt has been seen in recent years by those in power as a major risk to the country’s economy and financial system. In this way, Beijing has progressively tightened its conditions for access to credit starting in 2020, which has dried up the sources of financing for already indebted groups. A wave of defaults followed, particularly that of the Evergrande group, which undermined the confidence of potential buyers and had repercussions throughout the sector, in a context of economic slowdown.
Source: BFM TV