China’s Country Garden offshore debt default looms

By Scott Murdoch

SYDNEY (Reuters) – Country Garden Holdings, China’s biggest private property developer, is hours away from defaulting on its $11 billion in overseas debt, yet to make a coupon payment due on Wednesday to its bond investors.

The looming default, which would be the latest in scores of Chinese developers who have defaulted, would deepen the crisis roiling the property sector, which makes up about a quarter of the world’s second largest economy.

Country Garden will be deemed in default on its overseas debt if it does not make a $15 million payment for a September 2025 bond by midnight in New York (0400 GMT).

The repayments had not been made by early Wednesday, Reuters reported. The company last week warned of its inability to meet offshore debt obligations.

Country Garden did not immediately respond to a request for comment from Reuters on Wednesday.

The latest indicator of the health of the struggling Chinese property market will become clear on Wednesday when property sales by floor area are due to be published. Nationwide prices of new homes for September will be released on Thursday.

With nearly $11 billion of offshore bonds and $6 billion of onshore loans, a default by Country Garden would set the stage for one of China’s biggest corporate debt restructurings.

Country Garden has also missed other offshore payments in the past few weeks, though those payments still have not seen their 30-day grace periods lapse.

A default would open the way for Country Garden’s offshore creditors to begin negotiations with the firm’s financial advisors to start a restructuring process which could take many months given the scale of the debt.

A CreditSights report published on Tuesday found China’s state-linked developers could still access funding markets while the private firms were struggling the most to source new capital.

“With homebuyers still biased towards state-linked developers, those privately-run developers still not yet in a default would likely find staying afloat an increasingly challenging prospect, squeezed by both insufficient contracted sales generation and funding inaccessibility,” the report said.