Jakarta, CNBC Indonesia – Chinese property giant, Country Garden gave a warning Tuesday (10/10/2023). The company has openly stated that it is unable to fulfill its foreign debt obligations.
Collect Reuters, this situation has the potential to cause the property developer to default. So far, Country Garden hasn’t default although it has missed coupon payments on several dollar bonds since last month and faces the end of a 30-day grace period to make payments that starts next week.
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“We will not be able to meet all overseas payment obligations when they fall due or within the relevant grace period,” the company said in a disclosure to the Hong Kong stock exchange.
The company later added that non-payment could result in creditors demanding accelerated payments. In fact, take law enforcement action.
Country Garden’s warning exposed unprecedented liquidity pressures in China’s property sector, which accounts for about a quarter of the economy. It also weakens sales, clouding prospects for developers.
China has rolled out a series of measures so far in recent months, including reducing deposit requirements and cutting existing mortgage interest rates to help renew homebuyer confidence. But raising developers’ debt concerns is unlikely to help achieve that goal.
On the other hand, Country Garden, which has foreign bonds worth US$10.96 billion and foreign loans worth 42.7 billion yuan, said it faced significant uncertainty regarding asset disposals. Meanwhile, its cash position is still under pressure.
The developer said it has appointed Houlihan Lokey, China International Capital Corporation (CICC), and law firm Sidley Austin as advisors to examine the capital structure and liquidity position and formulate a holistic solution. The company added that it will work closely with advisors to develop the most pragmatic and optimal solution for all stakeholders while asking for patience from creditors.
Meanwhile analyst Morningstar, Jeff Zhang, said whether the company will default depends on the outcome of foreign debt restructuring. The next two weeks will be very important.
“We do not expect Country Garden’s liquidity to improve significantly as homebuyers and financial institutions will continue to wait,” he said.
[Gambas:Video CNBC]
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