HONG KONG/NEW YORK, Sept 4 (Reuters) – Country Garden (2007.HK) has agreed with developers to extend payments on land debts worth 3.9 billion yuan ($537 million). China’s crisis-hit real estate sector has been able to make some gains. -I needed a rest.
But while investors in the company may have breathed a sigh of relief, a series of government stimulus measures quickly revived demand and eased the industry’s cash crunch, helping the world’s second-largest economy It remains to be seen whether it will help relieve depression.
The financial crisis at China’s top private developer has only further highlighted the fragile state of the country’s real estate industry, which accounts for about a quarter of the economy and has been in deep debt trouble since 2021.
Country Garden is considered to be financially sound relative to its peers and had no debt, both onshore and offshore, until a coupon payment on its dollar bonds was made last month after slowing housing demand hurt cash flow. failed to meet repayment obligations.
Since then, Chinese authorities have launched a number of measures, the most important of which are lower interest rates on existing mortgages and preferential loans for first-time home buyers in big cities.
Tara Hariharan, Managing Director at Global Macro “This is critical to our ability to meet debt maturities.” New York hedge fund NWI Management.
He noted that Country Garden and other developers face significant maturity payments this year.
Country Garden’s shares rose more than 7% in early trading on Monday, while Hong Kong’s Hang Seng Mainland Property Index (.HSMPI) rose more than 6%.
The agreement, reached after a vote on the proposal late Friday, would allow Country Garden to repay the land debt in installments over three years in exchange for meeting its obligations by Sept. 2.
It also faces another, albeit much smaller, pressing debt payment challenge. That means the grace period for last month’s unpaid coupon payments on two offshore dollar bonds worth a total of $22.5 million ends on Tuesday.
Country Garden’s ability to avoid an onshore default has raised hopes that the company will be able to make interest payments on those bonds, said three offshore creditors, who asked not to be identified as they are not authorized to speak to the media. As stated in the conditions.
Creditors then said Country Garden was expected to enter into negotiations to restructure all of its offshore debt to avoid a “hard default” similar to that faced by domestic creditors.
Country Garden did not respond to requests for comment.
China’s real estate industry may have found some respite, but some market participants said they plan to distance themselves from the sector until home sales recover.
“We sold all of our Chinese real estate shares in April 2020 and have not repurchased them since then,” said Qi Wan, CEO of Hong Kong-based Megatrust Investment. . “You’re not going to touch a private developer with a 10-foot pole right now.”
(1 dollar = 7.2606 Chinese yuan)
Reporting by Xie Yu in Hong Kong, Carolina Mandl in New York and Joe Cash in Beijing. Written by Sumeet Chatterjee.Editing: Edwina Gibbs and Lincoln Feast
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