China’s Country Garden Buys Time to Repay Debt—but Not Long | Kanebridge News
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China’s Country Garden Buys Time to Repay Debt—but Not Long

The property giant has a second chance to make an interest payment this week

Tue, Sep 5, 2023 7:45amGrey Clock 3 min

HONG KONG—China’s top surviving private developer bought more time to sort out its liquidity problems, giving investors hope that it will cobble together enough cash to avoid defaulting on its U.S. dollar bonds this week.

Country Garden Holdings on Friday said it got approval from investors in mainland China to extend the maturity date of $537 million in domestic bonds by three years. The yuan-denominated debt was originally due Monday. An offshore unit of the 31-year-old property giant separately made an interest payment of around $600,000 on a bond denominated in Malaysian ringgit on Monday, according to a person familiar with the matter.

The debt extension and bond payment created optimism that Country Garden can address a debt load that includes a range of foreign currency bonds—and a make-or-break interest payment this week.

The developer’s Hong Kong-listed shares jumped 15% on Monday, closing at their highest level in about three weeks. Other Chinese property stocks also gained, while the broader Hang Seng Index rose 2.5%.

Country Garden’s bond prices also edged higher, although most of its dollar bonds remained below 10 cents on the dollar, levels that indicate a high probability of default.

Chinese authorities have taken more steps in recent days to shore up the country’s beleaguered housing market, where sales have declined for most of the last two years. Last Thursday, the People’s Bank of China lowered minimum down payments on first and second home purchases and told banks they can lower the rates on existing mortgages. Regulators also recently expanded the definition of a first-time home buyer, a category that comes with lower mortgage rates and smaller down payments.

The rule changes helped to draw more people to real estate showrooms over the weekend. Demand for new homes in Shanghai increased noticeably after the new measures were implemented, according to Chen Julan, a senior analyst with China Index Academy. In Beijing, some developers withdrew discounts and adjusted their prices slightly higher, the research firm said.

The new rules could give a temporary boost to home sales in about a dozen major cities, said Song Hongwei, a research director of Tongce Research Institute, which tracks and analyses China’s real-estate market. He said lower-tier, poorer cities may not reap similar benefits and predicted that the overall housing market will eventually weaken again.

Country Garden’s recent cash crunch has largely been a result of slumping home sales in many parts of China. The company is one of the biggest surviving privately run developers and has a large presence in the country’s poorer regions. In August, it sold homes valued at a total of around $1.1 billion, almost three-quarters lower than a year earlier.

The company missed $22.5 million in coupon payments on bonds with a total face value of $1 billion in early August, and has a 30-day grace period to come up with the money. That grace period expires this week.

Even if it does pay the interest on its dollar bonds this week, it has many more coupon payments due in the coming months. Investors are skeptical that it can avoid default—unless its sales start growing again. Country Garden’s most recent financial report said that as of June 30, it had the equivalent of $15 billion in bonds, bank debt and other borrowings due within a year.

The company lost more than $7 billion in the first half of 2023, its worst financial performance since it went public in 2007, after its contracted sales for the period shrank 30%. Country Garden told investors it was “deeply remorseful” but said it was committed to turning things around.

China’s economy has struggled through much of this year, with falling exports, weak manufacturing and a slowdown in consumer spending all pointing to problems broader than a property slowdown. But cracks in the property sector, which was once seen as a major source of wealth creation in China, are exacerbating the broader economic malaise.

Chinese property developers’ falling property margins and weak sales will weigh on earnings until the end of next year, according to analysts at S&P Global Ratings. Not all developers will feel the same degree of pain. Those with links to the government or with good access to financing are better positioned to endure the fall in margins, the S&P analysts said in a note on Monday.


Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’

Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual

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The home building market is on the rebound as building approvals rise, new data reveals.

Information from the Australian Bureau of Statistics shows that the total number of dwellings approved in August was up 7 percent seasonally adjusted, with apartments leading the way.

Private sector house approvals gained 5.8 percent in August while private sector residences excluding houses were up 9.4 percent. This follows on from a decrease of 14.6 percent in July and indicates a solid recovery in the Australian construction sector as the end of the year approaches.  

Approvals for total dwellings were strongest in the two largest states, with Victoria recording a rise of 22.2 percent and NSW 12.5 percent. Western Australia also saw a significant rise of 12.3 percent.

In Queensland, the results were less positive for the sector, with total dwelling approvals falling by -26.9 percent. Tasmania also experienced a drop in approvals in August, down -10.1 percent and South Australia -6.9 percent.


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Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual

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