Country Garden, Indebted Chinese Developer, Delays Bondholder Vote Amid Default Fears

Country Garden, a prominent Chinese real estate developer grappling with extensive debts, has postponed the deadline for a crucial bondholder vote on extending repayment for a key note. The move comes as the company faces the looming specter of a potential catastrophic default. As one of China’s largest builders, Country Garden has amassed debts exceeding US$150 billion. It recently revealed its failure to make interest payments on two bonds, raising the risk of default.

The developer sought an extension of payment for a 3.9 billion yuan (US$535 million) note until 2026 and initially set the bondholder vote deadline for Friday. However, according to a filing on the Shanghai Stock Exchange’s private disclosure platform, reported by Bloomberg, the company has pushed back the voting deadline to August 31.

If bondholders reject the proposal, Country Garden could become the most significant Chinese real estate firm to default since Evergrande’s predicament in 2021. The company is also facing another bond payment deadline at the beginning of September.

The financial struggles of Country Garden have raised concerns that its potential collapse could have far-reaching consequences, causing disruptions in China’s economy and financial system. The country’s economic growth has largely been driven by the property and construction sectors, accounting for about a quarter of the gross domestic product (GDP).

The Chinese government has taken steps to support the industry amidst broader economic challenges and introduced new mortgage easing policies to provide further relief. Country Garden is preparing to release its first-half-year results, projecting a potential net loss of up to 55 billion yuan (US$7.5 billion).

Additionally, the company is under pressure due to 31 billion yuan in bonds set to mature in 2024, as noted by Moody’s rating agency. Fitch Ratings recently downgraded a Country Garden subsidiary to junk status, citing concerns about the developer’s liquidity pressure impacting growth, brand reputation, profitability, and funding access.