Investing.com | Editor Venkatesh Jaltalkar
Published October 19, 2023 at 12:58 AM ET
As reported on Thursday, Chinese real estate developer Country Garden Co. is facing potential financial collapse due to a severe lack of funding and a downturn in the real estate market. The company is under pressure to pay $15 million in interest on foreign bonds within a 30-day grace period to avoid default. This comes as the company is grappling with declining sales and selling assets and stock to pay down large debts.
The company recently announced that it expects to default on foreign debt payments on dollar-denominated bonds due in 2025. The situation is similar to China Ever Grande, which has filed for bankruptcy protection and is currently negotiating debt restructuring with creditors. The two companies, once competitors, are now fighting to pay off their debts.
Country Garden’s plight highlights the seriousness of China’s real estate crisis, which caused real estate development investment to decline by 9.1% year-on-year. The seriousness of this crisis would be further emphasized if Country Garden were to default on its debts.
Adding to the company’s woes, Hong Kong-based Kingboard Holdings has filed a lawsuit against Country Garden for failing to pay about $200 million in debt due by the end of the year. The company’s financial problems worsened as pre-sales of unfinished apartments fell sharply, with the company reporting a $7.1 billion loss in the first half of this year.
Chairman Yang Huiyan and founder Yang Guoqiang are at the center of the crisis. Before the company’s initial public offering in 2007, Ms. Yang transferred a majority stake in Country Garden to her daughter, Mr. Yang. As financial problems worsened, Yang donated about $800 million worth of stock in the company’s services subsidiary to a family charity.
A statement released by Country Garden on its WeChat social media account said both men remained in China despite rumors that they had fled the country amid the financial turmoil. The company currently faces the daunting task of paying off nearly $15 billion in debt within the next year.
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Written by: Investing.com
