China’s Former Property Giant Struggles to Stay Afloat
Financial Woes Mount
Country Garden, once China’s largest developer, has reported staggering losses in its long-overdue 2023 and interim 2024 financial results. The company’s struggles are a stark reflection of the prolonged property sector crisis that has plagued the industry since 2021. With property sales in China plummeting by almost 50% over the past three years, Country Garden’s fortunes have taken a drastic turn.
A Debt Crisis Unfolds
The developer’s woes are compounded by its massive debt burden. Country Garden defaulted on $11 billion of offshore bonds in late 2023, leading to the suspension of its Hong Kong shares from trading since April 2, 2024. The company’s interest-bearing debt stood at a staggering 250.2 billion yuan as of end-June last year, while its cash and cash equivalents were a mere 6.7 billion yuan.
A Glimmer of Hope?
Despite the dire circumstances, Country Garden expects a smaller annual loss for the full year of 2024, thanks to improved margins and reduced administrative and sales expenses. The company’s net loss of 12.8 billion yuan in the first six months of 2024 is a significant improvement from its record net loss of 178.4 billion yuan in the full year of 2023.
Fending Off Liquidation
Country Garden’s efforts to restructure its debt and stave off liquidation are closely tied to its recent financial reports. The company has proposed a debt restructuring plan that would slash its offshore debt by 70%, and has reportedly reached an “understanding” with a lender group. The next liquidation hearing is scheduled for January 20.
A Sharp Decline
Country Garden’s annual sales by value plummeted by over 70% last year, causing its national ranking to drop to 16 from 7 in 2023, according to a survey by real estate researcher CRIC. This marks a stunning fall from grace for a company that was once China’s biggest developer by sales.
Uncertainty Looms
As Country Garden navigates the treacherous landscape of debt restructuring and liquidation proceedings, its future remains uncertain. One thing is clear, however: the company’s struggles are a symptom of a broader property sector crisis that continues to wreak havoc on China’s economy.
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