Construction site of a residential building by Chinese developer Country Garden on August 18, 2023 in Tianjin, China.Reuters/Tingshu Wang/File photo Obtaining license rights
HONG KONG, Sept 5 (Reuters) – Country Garden (2007.HK) has made interest payments on two U.S. dollar bonds ahead of the grace period that was due to end on Tuesday, a person close to the company said. revealed. Beleaguered developers and China’s real estate sector in crisis.
China’s largest private real estate developer has defaulted on interest payments on $22.5 million in bonds due on August 6, further raising concerns about the developer’s cash flow and keeping markets on edge throughout the 30-day grace period. fell into a state.
Although the amount was relatively small, failure to make the payment would have undermined fragile hopes in financial markets that China’s steady drip of policy stimulus was beginning to stabilize its sluggish real estate market and broader economy. .
It would have also increased the risk of default and demands for faster payments from other dollar-denominated bondholders, bondholders and lawyers said.
Country Garden did not respond to requests for comment. The people close to the company declined to be named because they were not authorized to speak to the media.
The company’s shares were little changed after falling nearly 3% on Tuesday after Reuters reported the wire transfers had been made.
The Hang Seng Mainland Real Estate Index (.HSMPI) and China’s CSI 300 Real Estate Index (.CSI000952) each fell more than 2% as some investors profited from gains in the previous session.
Tuesday’s move comes after Country Garden received approval from domestic creditors on Friday to issue private placement bonds worth 3.9 billion yuan ($536 million).
Country Garden had not missed any debt repayment obligations, both domestic and overseas, until last month when it failed to pay interest on a $2 bond due to tight cash flow due to a slowdown in demand for new housing.
In addition to the payment scheduled for Tuesday, Country Garden is due to receive about $162 million in offshore bond interest payments later this year, data from researcher CreditSights revealed.
Country Garden’s predicament highlights the fragile state of China’s real estate sector, which accounts for about a quarter of the world’s second-largest economy, since the start of a government campaign against high leverage in 2021. , the situation is getting worse.
Making matters worse, the post-pandemic economic recovery has been lackluster.
A private sector survey on Tuesday showed services activity expanded at the slowest pace in eight months in August as weak demand continued to weigh on the economy and stimulus measures failed to meaningfully revive consumption. became.
The latest stimulus package includes lower existing mortgage rates and preferential loans for first-time home buyers in big cities.
Susannah Streeter, head of money and markets at Hargreaves Lansdown (UK), said: “Weak domestic demand and falling house prices, particularly in China’s smaller cities, are making the real estate sector vulnerable.” Concerns remain.”
“While the stimulus package to increase mortgage lending is welcome, greater support is needed to further restore confidence in the sector and put at-risk property companies on stronger footing. It will be.”
Report by Xie Yu in Hong Kong, Chi Xue in Shanghai and Siddarth S. in Bengaluru. Written by Sumeet Chatterjee.Editing: Christopher Cushing
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