A construction site containing residential buildings by Chinese developer Country Garden is pictured in Tianjin, China, August 18, 2023. Portal/Tingshu Wang/File Photo Acquire License Rights
HONG KONG, Sept 5 (Portal) – Country Garden (2007.HK) made interest payments on two U.S. dollar bonds as a payment deadline was set to expire on Tuesday, a person close to the company said, in relief for embattled developers and crisis-hit Chinese Real estate sector.
China’s largest private real estate developer has failed to pay coupons on bonds totaling $22.5 million due Aug. 6, adding to fears about the developer’s liquidity situation and sending markets lower during their 30-day payment period held my breath.
Although the amount was comparatively modest, the non-payment would have dashed the faint hope in financial markets that China’s steady stream of policy stimulus measures would begin to stabilize the battered real estate market and the broader economy.
It would also have increased the risk of default and demands from holders of other dollar bonds to speed up their payments, bondholders and lawyers said.
Country Garden did not immediately respond to a request for comment. The person close to the company declined to be identified because he was not authorized to speak to the media.
The developer’s share price fell about 3% on Tuesday, reflecting little change, after Portal reported that the payments had been transferred.
The Hang Seng Mainland Properties Index (.HSMPI) and China’s CSI 300 Real Estate Index (.CSI000952) each fell more than 2% as some investors benefited from gains in previous sessions.
Tuesday’s development came after Country Garden received approval from domestic creditors on Friday to extend a private bond worth 3.9 billion yuan ($536 million).
Country Garden had not missed its debt repayment obligations at home or abroad until it defaulted on coupons on its $2 bonds last month after slowing demand for new homes led to lower cash flow.
In addition to payments due Tuesday, Country Garden has about $162 million in offshore bond interest payments due for the rest of the year, according to data from researcher CreditSights.
Country Garden’s predicament highlights the fragile state of China’s real estate sector, which accounts for about a quarter of the world’s second-largest economy and whose situation has worsened since a government campaign against high debt began in 2021.
Making matters worse, the post-pandemic economic recovery has been lackluster.
Services activity expanded in August at its slowest pace in eight months, a private sector survey showed on Tuesday, as weak demand continued to weigh on the economy and stimulus measures failed to significantly boost consumption.
Recent incentives have included lowering existing mortgage rates and preferential loans for first home purchases in major cities.
“With domestic demand weak and property prices falling, particularly in smaller Chinese cities, there are still concerns about the fragility of the property sector,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown, UK
“Stimulus measures to increase mortgage lending are welcome, but a much larger support package is likely to be needed to restore more confidence in the sector and put vulnerable property firms on firmer footing.”
Reporting by Xie Yu in Hong Kong, Chi Xue in Shanghai and Siddarth S. in Bengaluru; Writing by Sumeet Chatterjee; Edited by Christopher Cushing
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