The company logo of Chinese developer Country Garden is pictured at the Shanghai Country Garden Center in Shanghai, China August 9, 2023. REUTERS/Aly Song/File Photo acquire licensing rights
HONG KONG, Sept 18 (Reuters) – Troubled Chinese property developer Country Garden (2007.HK) faces a new liquidity test with Monday’s deadline to pay $15 million in interest linked to an offshore bond after avoiding a last-minute default twice earlier this year. month.
The country’s number one private developer, whose financial woes have worsened the outlook for the real estate sector and prompted Beijing to unveil a series of support measures, will have a 30-day grace period to pay the coupon before being considered to be in default.
If Country Garden does not pay the $15 million before the grace period ends in mid-October, the principal will become due immediately and any service failure will trigger cross-default conditions, said Sandra Chow, co-head of Asia-Pacific research at CreditSights.
“It’s going to be very difficult” for Country Garden to meet its debts due to falling cash flow levels at a time when property sales in the world’s second-largest economy remain very weak, Chow said.
A Country Garden spokesperson did not immediately respond Monday to Reuters’ request for comment on its latest debt repayment obligation.
Country Garden warned last month of default risks if its financial performance continues to deteriorate. It has debt of 108.7 billion yuan ($14.9 billion) due within 12 months, but cash of only about 101 billion yuan as of June.
It avoided default by winning approval from its creditors to extend payments on an onshore private bond, in a major relief for the embattled Chinese developer as well as the crisis-hit real estate sector.
In August, the developer missed $22.5 million worth of coupon payments tied to two-dollar bonds, but managed to transfer funds before the grace period ended earlier this month , thus avoiding a payment default.
Last week, National Bondholders approved a three-year extension of repayment on seven more Country Garden bonds.
Shares of Country Garden, one of the few major Chinese developers that has not defaulted on its debts, were trading almost 1% higher in Hong Kong, while the broader market (.HSI) was down 0.9%.
Many creditors believe Country Garden will have to restructure its offshore debt if it does not obtain liquidity support soon.
Some of Country Garden’s offshore creditors have begun discussions with New York law firm Kobre & Kim LLP and London-based Ashurst and are considering forming groups if the property developer seeks to restructure its debt.
Reporting by Xie Yu in Hong Kong; Edited by Sumeet Chatterjee and Lincoln Feast.
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