(Bloomberg) — Struggling Chinese developer Country Garden Holdings Co. faces two more tests Monday: an initial deadline to pay interest on dollar bonds and the end of creditors’ vote on its request to extend payment on a note in yuan.
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Holders of the local bond maturing on October 21 have until 10 p.m. Beijing time on Monday to vote on the proposal to extend the payment by three years. If they reject it, Country Garden would have to pay the 492 million yuan ($67.6 million) in outstanding principal next month, its largest short-term installment, even as it struggles to make payments more modest.
There is also $15.4 million in interest actually due Monday on a dollar security maturing in 2025, according to data compiled by Bloomberg. It benefits from a grace period of 30 days.
The memories are fresh from a similar $22.5 million combined interest payment that Country Garden was unable to make by the Aug. 7 deadline, increasing the risks of its first default. The fall shocked Chinese financial markets before the company finally honored its obligation at the last minute of grace periods earlier this month.
Country Garden was once China’s largest property developer before finding itself plunged into a broader property debt crisis and warning it could default. Most of its dollar bonds have fallen to deeply troubled levels below 10 cents, after some neared 80 cents in June.
A well-known name in China for building homes in small towns, Country Garden is also one of the world’s most indebted developers. A record loss in the first half complicated efforts to reduce total liabilities by 1.36 trillion yuan.
The yuan bond, whose voting ends on Monday – after being delayed for the third time last week – was issued by Guangdong unit Giant Leap Construction. This is the last in a group of eight notes totaling 10.8 billion yuan for which Country Garden has requested to spread repayment over three years, with the extension of the other seven having already been approved in recent days. The company had also secured an extension of a separate yuan bond in recent weeks.
All of this helped provide significant relief, leaving Country Garden with approximately 2 billion yuan of principal and interest for local notes with maturities or remaining put options in 2023.
But there is no shortage of obstacles. At the heart of the challenges are broader declines in the country’s real estate sector. The company’s contract sales plunged 72% from a year earlier in August, worsening after declines in previous months.
Led by one of China’s richest women, the developer has become a symbol of the broader real estate debt crisis that has led to record defaults and prompted authorities to adjust policy to avoid further contagion . Stocks have plunged 60% this year, with the rebound since late August stalling last week.
In a sign of how the crisis has dragged the former giant down, the company ranked sixth in sales through August, according to China Real Estate Information Corp.
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