China’s Country Garden Buys Time to Repay Debt

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.

Legend has it that opera icon Dame Nellie Melba performed in the minstrels’ gallery and current-day hitmaker Tones and I filmed a music video at Noorilim estate. The high profile property has even been the breeding ground for multiple Melbourne Cup winners including 1910 champion, Comedy King, who was laid to rest within the grounds.

In 1998, prominent art dealer and entrepreneur behind Menzies International, the late Rod Menzies and his wife Carolyn, bought Noorilim for $3.325 million and set about restoring the Italianate mansion to its former glory.

Today, the 65ha property in the heart of the Goulburn Valley is on the market for only the third time in the past 50 years via Sean Cussell of Christie’s International Real Estate with a price guide of $15m.

During the Menzies’ ownership, the glamorous country estate was a venue for weddings, concerts, and private events, welcoming a long list of international guests. Chart-topping artist Tones and I filmed the video for her song Bad Child at the estate, and the period property has played its part in numerous films and television series. Singer and actor Ted Hamilton, known for roles in Division 4, Homicide, The Love Boat, M*A*S*H and Hawaii Five-O, was also a regular performer at the address.

Given its stately grandeur, Noorilim was even a successful auction centre for fine art with works by Brett Whiteley, Sidney Nolan and Jeffrey Smart sold under the hammer at the property.

Built in 1879 by celebrated architect James Gall for parliamentarian William Winter-Irving, Noorilim is a prime example of post-Gold Rush prosperity in Victoria. At the time of its construction in the mid to late-1800s, Australia had been labelled one of the richest nations on earth and Melbourne’s monied elite were spilling out of the city looking to build country estates to rival those in Great Britain. The nouveau riche began commissioning lavish ornamental houses shadowing the Gothic, Italianate and Queen Anne designs of Europe.

Noorilim’s facade is a striking example of this “boom style” architecture featuring an asymmetrical tower, ornate balustrades and grand arched loggias that frame sweeping views of the estate’s manicured grounds.

Inside, the vast 1022sq m residence has 5m ceilings and lavish period features, including 15 fireplaces, seven staircases, and intricate Corinthian columns.

At the heart of the mansion its grand hall has Minton tiles imported from England and laid by Italian artisans who were shipped out specifically for the job. There is a turret lookout, a billiard room, 10 bedrooms, four bathrooms, an office and grand formal rooms such as a lounge, library and dining room all with expansive windows showcasing views of the gardens and vineyard.

Noorilim’s name is derived from the Indigenous Yorta Yorta language and means “place of many reeds” reflecting the estate’s connection to its natural surroundings. Complementing Gall’s vision, renowned landscape designer William Guilfoyle — who worked on Melbourne’s Royal Botanic Gardens — crafted Noorilim’s standout gardens.

The grounds are home to echidnas, kangaroos and koalas, more than 300 mature trees including ancient Moreton Bay figs, a rose garden with a central fountain, an ornamental lake, a boathouse, and even a private beach on the banks of Goulburn River. There is also an extensive wine cellar, numerous outbuildings and barns, as well as a heritage-listed water tower. The working vineyard produces Chardonnay, Shiraz, Cabernet, and Merlot grape varieties.

Noorilim, near Nagambie, is 150kms north east of Melbourne at 205 Wahring Murchison East Rd, Wahring. The property is listed with Sean Cussell from Christie’s International Real

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

An architectural jewel of Victoria’s Goulburn Valley, the Noorilim Estate stands as one of Australia’s most extraordinary Italianate mansions.