Chinese economy
Property developer disputes claims that founder and chairman have left the country amid reports key deadlines were missed
Thu, Oct 19, 2023, 12.42 BST
The crisis in China’s real estate sector deepened as Country Garden, the country’s top-grossing property developer, reportedly missed its final deadline to pay interest on a dollar bond, putting it at risk of default.
The company, which has around $200 billion (163 billion pounds) in liabilities and nearly $11 billion in dollar-denominated offshore bonds, was due to make a $15.4 million coupon repayment this week, however, reportedly did not do so. The company’s share price fell 4% in Hong Kong on Thursday and is down 74% since the start of the year.
Country Garden denied reports that both its founder and chairman had left China. A statement said its founder Yang Guoqiang and his daughter Yang Huiyan, who runs the company and is majority owner, were working “as usual” in China.
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Yang Guoqiang was born into a farming family and his rags-to-riches story led to nicknames for him and his company such as “the most down-to-earth tycoon” and “the universe’s No. 1 real estate developer.” He built his fortune for years working as a farmer and on construction sites before turning to real estate development. Two years ago, before China’s real estate bubble burst, his daughter was Asia’s richest woman, with an estimated fortune of $29.6 billion.
Country Garden is struggling to avoid defaulting on its international debts. Last week it said it was unlikely to “meet all offshore payment obligations as they become due or within the relevant grace periods”. It added that its sales were “under significant pressure” while available funds continued to decline.
Creditors are urgently seeking talks with the developer, Portal reported. Two groups of bondholders have emerged that are seeking discussions about a possible debt restructuring package. One group holds about $2 billion in offshore Country Garden bonds and consists of international investors and fund managers.
Ratings agency Moody’s said it could downgrade the developer’s corporate family rating if recovery prospects for its creditors deteriorate further. Moody’s said Country Garden’s senior unsecured rating of C was already at the low end of its scale.
The crisis in China’s real estate industry was triggered by a crackdown by the authorities on the high level of indebtedness of property developers, which led to Evergrande being unable to service parts of its $300 billion debt mountain at the end of 2021. Real estate accounts for more than a quarter of China’s debt. Construction delays and a decline in property sales have slowed growth.
Evergrande, the world’s most indebted developer with a $340 billion burden, faces a bankruptcy hearing in Hong Kong at the end of the month. His debt restructuring plan collapsed in September following an investigation.
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