China’s real estate giant Country Garden Holdings Limited (Country Garden) has reportedly missed the self-set target date for obtaining support from the main creditor group for debt restructuring, putting the company at risk of ultimate liquidation.
According to sources familiar with the matter, Country Garden has not yet submitted the restructuring terms and, in a hearing in July in Hong Kong seeking liquidation proceedings, Country Garden had anticipated reaching an agreement on the debt terms with the main creditor group by the end of September.
If Country Garden fails to present a feasible debt plan, it will face the risk of final liquidation, the source disclosed.
In February this year, Ever Credit Limited, a subsidiary of Hong Kong-listed Jian Ta Holdings Group Limited, filed a winding-up petition against Country Garden involving around HK$1.6 billion (approximately $205 million) in unpaid regular loans and accrued interest. On July 29, the Hong Kong court postponed the liquidation hearing for Country Garden to January 20, 2025.
A year ago, Country Garden defaulted on its debts. Throughout 2023, Country Garden accumulated defaults on offshore bonds worth $11 billion.
As a leading player in China’s real estate sector, Country Garden’s predicament reflects the overall sluggishness in the Chinese property market.
The unaudited operational data for August released by Country Garden on September 5 showed a significant decline in sales. In August, the equity sales of Country Garden amounted to 3.43 billion yuan, a 57.02% decrease from the previous year’s 7.98 billion yuan, with a sold area of 350,000 square meters, down by 57.83% from 830,000 square meters in the previous year.
The cumulative equity sales amount for the first eight months were 28.94 billion yuan, marking an 80.55% drop from the 148.81 billion yuan in the previous year.
Due to poor sales, Country Garden had to use real estate assets to offset debts. On September 10, Dio Home Furnishings announced that its wholly-owned subsidiary Euro Sino had signed an agreement with relevant parties of Country Garden to acquire three of Country Garden’s properties to offset the 423 million yuan debt owed by Country Garden.
Since Country Garden’s land acquisitions are primarily focused on third and fourth-tier cities in China and have limited exposure to first and second-tier cities, some analysts believe that if Country Garden were to explode like Evergrande, the resulting repercussions on society would be even more significant.