China’s Property Giant Takes Crucial Step Towards Debt Restructuring
In a significant development, Country Garden, once China’s largest property developer by sales, is poised to reach an agreement with creditors next month to restructure its massive $16.4 billion offshore debt. This move comes as a welcome respite for the embattled sector, which has been grappling with a debt crisis since 2023.
Averting Liquidation
A Hong Kong court has granted Country Garden an adjournment until May 26, allowing the company to continue its restructuring efforts. This decision is crucial, as it enables the developer to avoid liquidation, which would have far-reaching consequences for the sector. The court’s ruling is a nod to the progress made by Country Garden in its restructuring efforts, which aim to reduce its offshore debt by a staggering 70%.
Sticky Points Remain
However, Country Garden’s lawyer has identified three key areas that require resolution with two major creditor groups. These include the release of security packages, the conversion price of convertible bonds, and the terms of new notes. The lawyer has requested time to negotiate these “sticky points” with the creditors, comprising a group of bondholders holding 30% of outstanding U.S. dollar senior notes and a group of seven banks.
Policymakers’ Dilemma
The property sector in China has been plagued by unfinished homes, shattered buyer sentiment, and a debt crisis that has seen major developers like China Evergrande Group default on their loans. Policymakers have been struggling to revive the sector with stimulus measures since 2022, but to no avail. A successful restructuring of Country Garden’s debt would be a significant step towards restoring confidence in the sector.
The Road Ahead
Country Garden’s lawyer has been instructed to disclose whether an agreement with creditors is likely by the end of February. If no progress is made, parties including the petitioner and creditors can apply to bring the next hearing forward. The outcome of these negotiations will have significant implications for the sector, and all eyes will be on Country Garden as it navigates this critical phase.
Leave a Reply