Country Garden faces key test as onshore bondholders set to vote on extension

HONG KONG (Reuters) – Embattled Chinese property developer Country Garden faces a critical test of investor confidence on Thursday, with creditors set to vote on its proposal to extend the maturity for an onshore private bond.

The vote, which is expected to conclude by 10 p.m. (1400 GMT) Hong Kong time, will be a key hurdle Country Garden will have to overcome as it strives to avoid default amid a spiralling financial crisis.

On Wednesday, the company – China’s largest private developer – posted a staggering $6.7 billion in first-half losses and warned of default risks.

Country Garden has been talking with its onshore creditors to extend a 3.9 billion yuan ($535.4 million) private bond due on Saturday.

According to the extension plan, Country Garden will repay the onshore private bond in seven installments ending in September 2026. Three initial installments will be made this year, with 2% of the principal each. The coupon will be kept at the same rate at 5.65% and paid annually.

The company is also seeking to add a 40-day grace period for the repayment of the bond, which is yet to be approved by onshore investors.

It might have more time to negotiate for the bond extension if onshore investors forego the longer grace period, some bondholders said.

Country Garden’s Hong Kong-listed shares were up around 8% on Thursday morning.

($1 = 7.2838 renminbi)