On September 10th, Deo Home announced that its wholly-owned subsidiary, Euoshen, has signed an agreement with the related parties of Country Garden to transfer three real estate properties to offset the debt of 423 million yuan owed by Country Garden. This news quickly became a hot search topic on Baidu on September 11th.
According to the announcement released by the board of directors of Deo Home Group Limited on September 10th, titled “Announcement on the Signing of the Equity Transfer Agreement by a Wholly-owned Subsidiary and Acceptance of Non-monetary Assets for Debt Settlement,” Euoshen, a wholly-owned subsidiary of Deo Home, recently signed a “Debt Release Agreement” with Country Garden Real Estate Group and Bain Glory Investment.
The agreement stipulates that Euoshen will acquire three real estate properties held by Bi Pu Property through the transfer of 100% equity and debt rights held by Bain Glory Investment. The total transaction price is 423 million yuan: Euoshen is to pay 157 million yuan for the equity transfer and 266 million yuan for the debt transfer, using a debt of 423 million yuan owed by Country Garden Real Estate Group’s subsidiary companies and affiliates to settle the transaction price. This transaction price will offset the 423 million yuan accounts receivable of Euoshen, and the counterparty will offset the company’s debt with non-monetary assets.
Additionally, Euoshen has agreed to waive 57.1187 million yuan of debts owed by Country Garden Real Estate Group’s subordinate companies and affiliated companies.
The announcement stated that accepting non-monetary assets as debt settlement reduces the risk of bad debt losses for accounts receivable and will have a more positive impact on the company’s current and future financial condition and operational results.
After this transaction, Deo Home stated that the company will continue to negotiate with Country Garden Real Estate Group to handle the remaining part of the outstanding procurement debt issues.
Industry insiders commented to the “China Fund News” that with Country Garden having significant debts to suppliers, Deo Home’s acquisition of real estate through debt settlement could serve as a reference for other suppliers.
Facing immense debt pressure, Country Garden has repeatedly delayed the release of financial reports, with the latest financial data available only up to June 2023. As of the end of June 2023, Country Garden reported cash and cash equivalents of 101.115 billion yuan, with total liabilities of 1,364.16 billion yuan.
Following the exposure of Country Garden’s risks, some associated suppliers have raised the issue of exchanging goods for properties. Mona Lisa stated that since some real estate companies faced liquidity problems, they actively sought to recover payments through measures like exchanging goods for properties and legal actions. Huida Sanitary Ware also mentioned that after conducting a recoverability analysis of Country Garden’s accounts receivable, considering factors such as the client’s operational status, credit rating, default of bonds and bills, and the exchange of goods for properties, the company provisioned a single credit impairment loss of 208 million yuan for this client.
The Chinese real estate giant, Country Garden, released unaudited operational data on September 5th, showing a significant drop in shareholder equity sales to 3.43 billion yuan in August, a 57.02% decrease compared to the previous year’s 7.98 billion yuan; sales for the first eight months of the year dropped by 80%.
On September 5th, Country Garden announced its intention to seek a 6-month extension for the repayment responsibility of nine domestic bonds until March next year. Previous estimates suggested that the total size of these nine domestic bonds amounts to nearly 15 billion yuan, with three bonds already extended three times.
According to the legal litigation information obtained from Tianyancha, recently, Country Garden’s enterprises – Country Garden Real Estate Group Limited, Rizhao Qin Garden Real Estate Development Co., Ltd., and Linyi City Country Garden Real Estate Development Co., Ltd., added one more entry as the target of enforcement, with an execution amount exceeding 41.16 million yuan, conducted by the Laoshan District People’s Court of Qingdao. Risk information indicates that Country Garden Real Estate Group Limited currently has nine enforcement targets, with a total amount exceeding 2.2 billion yuan. Additionally, the company has multiple restraining orders on consumption, dishonest subjects (Lao Lai), and frozen equity information.
Due to Country Garden’s failure to release the 2023 financial report by March 31st, the trading of its stocks has been suspended since 9 am on April 2nd, 2024, and remains suspended until further notice.
One netizen with the username “Professional Alchemist for 30 years” commented: “Suppliers are really helpless; there seems to be no better alternative than accepting property instead of debt.”
Another user, “Another One Bites the Dust,” suggested: “Sell the houses at a discount, and let the original owners seek their rights. Selling directly at a discount to suppliers is also a good option, then let the properties flow into the secondary market.”