China’s housing debt crisis continues to escalate as more indebted real estate companies face liquidation requests. Chinese real estate firm Country Garden Group, which partnered with a renowned Macau enterprise to acquire a large cultural and tourism complex project in Zhongshan, Guangdong, has been petitioned for liquidation in Hong Kong by its business partner due to debt.
On the afternoon of December 9, the stock price of Chinese Country Garden Group Holdings Limited (hereinafter referred to as “Country Garden”, 03383.HK) listed in Hong Kong suddenly plummeted, ultimately closing with a 18.42% drop. That evening, Country Garden announced that it had received notice that New Noble (Zhongshan) Enterprise Management Co., Ltd. had filed a liquidation request with the Hong Kong court against Country Garden.
Country Garden disclosed on the Hong Kong Stock Exchange website that this liquidation request involves two unpaid amounts, one exceeding 18.58 million US dollars and the other exceeding 2.23 million Hong Kong dollars, both stemming from an arbitral award issued by the China International Economic and Trade Arbitration Commission on September 25.
The announcement stated that the High Court is scheduled to hold the first hearing on the liquidation request on February 25 next year.
Four years ago, New Noble International Development from Macau and Country Garden Group won a land parcel in Zhongshan City, Guangdong Province for a total price of 3.82 billion yuan to jointly develop a large cultural and tourism ecological complex. However, as of now, there have been no signs of progress on the project. New Noble International Development revealed that due to Country Garden Group’s failure to comply with several terms of the cooperation agreement, they have issued a notice to terminate the cooperation, seeking the company to take corresponding responsibilities and recover related payments.
Country Garden Group emphasized that they will strongly oppose the liquidation request, aiming to restructure their overseas debts comprehensively and reach a restructuring agreement with major overseas creditors as soon as possible. The company is also in communication with New Noble, striving to negotiate an effective resolution to persuade them to withdraw the liquidation petition.
In May 2024, Country Garden had already defaulted on interest payments for a US dollar note within the grace period.
In recent years, Country Garden Group has suffered a severe decline in performance. Financial reports show that in the first half of this year, Country Garden Group achieved revenue of 13.574 billion yuan, a year-on-year decrease of 35.8%, with a loss of 8.03 billion yuan.
As of the end of June this year, the group’s total debt stood at approximately 47.442 billion yuan, including borrowings due within one year of around 37.9 billion yuan, while the company’s available cash and cash equivalents were only 3.093 billion yuan.
China’s economy as a whole continues to be weak and sluggish. The real estate debt crisis in China erupted in early 2022, with real estate companies facing financial troubles one after another, and several companies have been ordered for liquidation by the courts, including Evergrande and China South City. Some defaulting companies have reached debt restructuring agreements with creditors, including Sunac China and Country Garden.
Leading real estate giant Vanke, which is in dire straits, has 2 billion yuan of domestic bonds due on December 15. The company held a creditors’ meeting on December 10 to seek support for its bond extension plan to avoid default. Bloomberg reported that at least three companies are currently opposed to it.