Chinese property developer, Country Garden, is grappling with a potential financial collapse due to a severe cash crunch and a slump in the property market, as reported on Thursday. The company is under pressure to make a $15 million interest payment on an overseas bond within a 30-day grace period to avoid defaulting. This comes as the firm is dealing with declining sales and is selling assets and shares to meet its significant debt obligations.
The company recently announced that it expects to miss an overseas debt payment on a dollar-denominated bond due in 2025. This situation draws parallels with China Ever grande, which filed for bankruptcy protection and is currently negotiating debt restructuring with creditors. Both companies were once competitors but are now battling to repay their debts.
Country Garden's predicament underscores the depth of China's real estate crisis, which has led to a 9.1% decrease in real estate development investments compared to last year. A potential default by Country Garden would further emphasize the severity of this crisis.
Adding to the company's woes, Hong Kong-based Kingboard Holdings has initiated legal action against Country Garden for failing to make payments on approximately $200 million of debt due by year-end. The firm's financial troubles have been amplified due to a dramatic fall in presales of unfinished apartments, leading to a reported loss of $7.1 billion in the first half of the year.
Chairwoman Yang Huiyan and founder Yang Guoqiang are at the center of the crisis. Before the company's initial public offering in 2007, Mr. Yang transferred his majority stake in Country Garden to his daughter, Ms. Yang. As the financial problems escalated, Ms. Yang donated about $800 million worth of stock in the company’s services subsidiary to a family charity.
Despite rumors that they had fled China amidst the financial turmoil, both individuals have remained in the country, according to a statement issued by Country Garden on its WeChat social media account. The company now faces the daunting task of repaying nearly $15 billion in debt within the next year.
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