Country Garden, once China's top real estate developer, has submitted preliminary terms for an offshore debt restructuring plan to avoid liquidation. The company defaulted on USD 11 billion in offshore bonds last year and faces a crucial Hong Kong court hearing on January 20, 2025. The proposal includes revised cash flow projections, weaker than prior estimates, and options like haircuts for bondholders and debt-to-equity swaps. This reflects broader struggles in China's property sector, with declining investments and new home prices. Securing creditor support is critical, as the outcome may set a precedent for other developers amid a faltering recovery in the industry.
Struggling Chinese property developer Country Garden has submitted preliminary terms for an offshore debt restructuring plan to creditors, signalling its intent to avoid liquidation. The company, once China's largest real estate developer, defaulted on USD 11 billion in offshore bonds last year and faces a liquidation petition in Hong Kong, with a crucial court hearing set for January 20, 2025.
The debt restructuring proposal includes revised cash flow projections, indicating weaker financial performance in the coming years compared to earlier estimates. The projections, typically part of such proposals, aim to demonstrate the company's ability to repay its debts. While details remain undisclosed, Country Garden confirmed that negotiations with key creditor groups are ongoing. A spokesperson emphasised the company's commitment to reaching an agreement as soon as possible.
The backdrop of this crisis highlights the broader challenges in China's property sector. Government efforts over the past year, including tax incentives and interest rate cuts, have failed to reverse the downturn. Official data shows property investments declined by 10.3% in the first ten months of 2024, while new home prices in October recorded the steepest year-on-year drop since 2015. Developers across the sector are grappling with mounting debt, with many facing liquidation lawsuits or restructuring.
Country Garden's restructuring framework reportedly includes options such as haircuts for bondholders and debt-to-equity swaps. Securing creditor support before the January hearing is critical to gaining additional time from the court to implement the plan. Financial advisor PJT Partners, representing the main group of offshore bondholders, has not commented on the ongoing discussions.
This crisis has left a significant mark on the Chinese property sector, with millions of unfinished homes and wavering investor confidence. If Country Garden successfully navigates the restructuring process, it may provide a template for other struggling developers. However, the broader outlook remains uncertain as market reforms and government interventions struggle to stabilise the industry.
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