Radio Free Asia by Chris Taylor 8/10/2023
‘Model’ real estate developer Country Garden misses interest payments on US$ bonds, causing its stock to plummet.Lauded by Beijing as a model business, Country Garden, a 31-year-old too-big-to-fail property developer, is showing signs of succumbing to the same cash-strapped suffocation that has blanketed China’s once vibrant real estate sector.
On Monday, Country Garden Holdings Co. failed to pay U.S.$22.5 million in interest due on debt securities with a total value of $1 billion.
“Prices of the two bonds, which were scheduled to mature in 2026 and 2030, plunged to less than 8 cents on the dollar, according to Tradeweb,” said one report. “Such levels indicate that investors are expecting the company to default.”
When bonds trade far below their face value, traders interpret it as meaning the bond holders don’t expect to get all their money back.
Country Garden still has a 30-day grace period to pay its coupons, before its bondholders can call it as in default, but its Hong Kong-listed shares fell 14% on Tuesday amid a broader selloff of China property stock.
A company spokesperson told the Wall Street Journal that the company was unable to make its interest payments due to deteriorating sales and a liquidity crunch.
In late 2021, property developer China Evergrande collapsed under accumulated debts, sending the global economy briefly into a spiral and leading to protests in China by would-be homeowners who claimed to have been defrauded on off-plan homes that were never built or completed.
After a short-lived bounce back early this year, China’s property market, in line with consumer spending in general, has drifted back into the doldrums. Along with Evergrande, major developers such as Sunac China Holdings, have defaulted, sending the entire real estate market into a deep slump.
More:
https://www.rfa.org/english/news/china/ccountry-garden-debt-delay-08102023023226.html
