Recently, Country Garden forecasted that its loss for the first half of the year could reach as high as $7.6 billion, leading to a drop in the company's stock price to a historic low. Media reports indicate that the company is preparing for debt restructuring.
According to reports from the Chinese news outlet Yicai, by the end of 2022, Country Garden's total debt amounted to approximately $194 billion. The company operates extensively across various cities in China and is expected to initiate the restructuring process soon.
The report further states that China International Capital Corporation (CICC) has been appointed as the financial advisor for this restructuring, to assist Country Garden in conducting financial analysis, strategic planning, and decision-making for the restructuring. Country Garden has declined to comment or make a statement on the matter, and CICC has not immediately responded.
Reuters this week reported that despite a 30-day grace period, Country Garden was unable to make a timely payment of $22 million in coupon payments, leading to market sell-offs of its stocks and bonds and exacerbating concerns over the entire real estate industry. The real estate sector accounts for a quarter of China's economy, but since the end of 2021, there have been many instances of defaults by real estate companies.
Last Friday, Country Garden's stock price fell by 14.4%, to HK$0.89 (equivalent to $0.1139) per share, hitting a new historic low. As of now, the company's stock price has fallen by 38%.
Additionally, Country Garden's onshore notes, including two types of bonds traded on the Shanghai Stock Exchange, have fallen by more than 11%. After missing two coupon payments, the trading prices of most of the company's dollar bonds have repeatedly hit new historical lows.
In a filing last Thursday, Country Garden forecasted a substantial loss for the first half of the year and stated it would take measures to fulfill its debt obligations and address current operational issues to get back on track.
Following the company's debt default, the increased liquidity and refinancing risks prompted rating agency Moody’s (NYSE:MCO) to downgrade Country Garden's corporate family rating from B1 to Caa1 on Thursday.
Other major Chinese real estate developers, including China Evergrande Group and Sunac China Holdings, have already proposed debt restructuring terms. Industry executives and analysts suggest that Country Garden's failure to pay this week could prompt regulatory authorities to introduce stronger support measures, but they do not believe these efforts will reverse the heavily indebted real estate industry's situation in the short term.
