Hong Kong/London CNN –
Country Garden warned on Wednesday that the company might not be able to meet its high debts as it reported a loss of 51.5 billion yuan ($7 billion) in the first six months of the year.
The company, which was China’s largest housing developer last year, said it was caught off guard by the depth and length of the slump in the property market, particularly in smaller Chinese cities, and did not react quickly enough.
“The company feels deep regret over the unsatisfactory performance,” it said in a filing to the Hong Kong Stock Exchange.
Country Garden confirmed it had missed interest payments to holders of some of its bonds earlier this month and that “if the company’s financial performance deteriorates further in the future” the group may default.
“All of the above… indicated the existence of material uncertainties that could cast significant doubt on the Group’s ability to continue as a going concern,” the filing continues.
The troubled real estate giant is grappling with a liquidity crisis that some fear could spread to China’s broader economy and even abroad.
This was announced by the company based in Foshan, Guangdong Earlier on Wednesday, the company said it planned to sell HK$270 million ($34.4 million) in new shares to Kingboard Holdings, a Hong Kong-based laminate manufacturer, in lieu of a loan to be repaid. to spend.
The announcement came on the same day as a major Chinese city, Guangzhou, Relaxed mortgage rules for homebuyers to help the struggling real estate sector.
On Monday, the company said its $100 billion project in Malaysia, its largest overseas project, was “operating normally,” adding that its operations in the region were “safe and stable.” The announcement, as well as recent moves by China to support the sector, gave Country Garden shares a brief boost in Hong Kong.
But the stock is still down 67% this year, and the company is under pressure.
Country Garden has total liabilities of nearly $200 billion. According to Moody’s, the company is under increasing pressure to pay down its debts – it has about 31 billion yuan ($4.3 billion) worth of bonds due by the end of 2024.
Earlier this month, reports of the company’s missed payments on two dollar-denominated bonds shocked the market. And last week the company pushed back a deadline from Aug. 25 to Aug. 31 for bondholders to vote on a plan to extend payments on a 3.9 billion yuan ($530 million) bond.
Investors fear that a company default could deal a further blow to already fragile investor confidence as Beijing seeks to save the struggling sector that is crucial to China’s economic growth.
On August 10, Country Garden acknowledged that the company was facing its “greatest difficulties” since its founding in 1992, citing declining sales and a difficult refinancing environment.
The news triggered a sell-off in the company’s securities and forced the company to briefly suspend trading in 11 of its onshore bonds. Chinese state media reported this At the time, it was expected that the developer would soon begin a debt restructuring process.
On Wednesday, Guangzhou became the first major Chinese city to announce an easing of mortgage regulations to encourage home buying.
Under the new rules, people who already had mortgage loans can be considered first-time home buyers and benefit from concessional loans, according to a statement from the city government.
The move took place days later Three Chinese regulators issued a joint statement allowing local governments to ease mortgage restrictions as part of the central government’s efforts to revive buyer demand.
Among other things, the housing and tax authorities jointly announced Friday that they would expand income tax refunds for people who buy new homes within a year of selling previous properties.