Country Garden said to pay 2 coupons as Chinese builder chips away at US$14.9 billion near-term

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Indebted Chinese developer Country Garden Holdings has paid coupons on two dollar bonds on time and completed a share issuance to repay loans to a creditor as the company takes steps to work out its 109 billion yuan (US$14.9 billion) of liabilities coming due in the next 12 months.

Country Garden paid a total of US$22.5 million in interest on two dollar bonds before the end of a 30-day grace period on September 6, according to sources close to the company. The semi-annual interest payments were originally due on August 6 to holders of a US$490 million February 2026 bond and a US$500 million August 2030 note.

The company separately issued 350.6 million new shares, or a 1.27 per cent stake valued at HK$270 million (US$34 million) to repay other debt, according to a Hong Kong stock exchange filing on Monday night. The proceeds will help repay HK$318.8 million Country Garden owes to Kingboard Holdings, a Hong Kong industrial firm and property developer.

Country Garden has taken a series of steps to avert defaulting on its debt as a failure to pay could trigger a cross-default, including for some of its 16 billion yuan of bank borrowings as of June 30. The heavily indebted developer bought more time to reorganise its finances after it won sufficient support from creditors on a proposal to delay a debt payment on a yuan note last Friday.

The share issuance enables the company to minimise cash outlay and thereby preserve cash resources, reducing its gearing level and strengthening the financial position of the group, Country Garden said in another filing last week.

After issuing the new shares, the outstanding principal owed to Kingboard Holdings is HK$1.598 billion, which will be paid by instalments, the last of which is in December 2023, the filing said.

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China’s three-year housing market slump has hurt sales at the country’s biggest developers, starving them of crucial cash flow to keep their businesses afloat and repay creditors. Waning confidence among homebuyers has put pressure on Country Garden’s operations, the company said last month.

Country Garden posted a record loss of US$6.7 billion for the first half of the year and warned of a potential default in a report to shareholders last month. Its cash balance shrank by 21 per cent to 101.12 billion yuan from 123.48 billion yuan a year ago.

The group had 101.7 billion yuan of outstanding bonds on June 30, while bank and other borrowings amounted to 156 billion yuan, according to its interim report. In total, about 109 billion yuan is due for repayment by June 2024.