When China's largest private property developer is scheduled to release its first-half results on Wednesday, the extent of Country Garden Holdings' cash-strapped predicament will be the main topic of discussion. As a result of missing two-dollar coupon payments and attempting to postpone the repayment of an onshore private bond, the company's liquidity crisis became public …
When China’s largest private property developer is scheduled to release its first-half results on Wednesday, the extent of Country Garden Holdings’ cash-strapped predicament will be the main topic of discussion. As a result of missing two-dollar coupon payments and attempting to postpone the repayment of an onshore private bond, the company’s liquidity crisis became public this month, escalating concerns about the wider economy and China’s faltering real estate market. Just before the findings were revealed, Country Garden unveiled a project to seek HK$270 million through equity financing. Early on Wednesday, shares of Country Garden were trading lower by about 2%. At the end of 2022, Country Garden’s total liabilities were estimated to be $194 billion. A startling decline from the 6.7-billion-yuan loss it reported in the second half of 2022 and from the net profit of 1.9 billion yuan it reported a year earlier, it has already projected a net loss of high to 55 billion yuan ($7.55 billion) in the first six months.
The company, which until this year was China’s top real estate developer by sales volumes, has suffered from a decline in margins as real estate sales and the value of the properties themselves have fallen as a result of China’s weakening economy. The company’s liquidity crunch got worse as a result of lower revenues and more difficult access to new capital in recent years. Investors wanted information on Country Garden’s short-term debt and fresh bank loans, according to an analyst with a foreign investment bank, in order to better comprehend its cash flow. According to a firm official, there isn’t much money left over after locking up the majority of its finances in project contractors’ escrow accounts to guarantee the delivery of homes over the following two years. The next months of the year will see the maturation of almost 60% of the company’s total onshore bonds; if the company is able to extend its repayment deadlines, it may be able to boost operations and cashflow, the official added. Since they were not licensed to speak to the media, they declined to give their names. According to a JP Morgan estimate, it would cost around 316 billion yuan to complete all of the company’s ongoing projects, including both sold-out and unsold apartments. Prior to its earnings, Country Garden chose not to comment. As well as skipping these conferences for the first time in many years, the corporation will not hold meetings with analysts or the media following the earnings announcement.
On Tuesday, Country Garden suggested extending the deadline for paying back a 3.9-billion-yuan private onshore bond by 40 days, starting on Saturday. The proposal to postpone complete repayment by three years must be approved by creditors by Thursday. According to Chinese news portal Yicai, Country Garden has appointed China International Capital Corporation (CICC) as a financial adviser and is set to begin a restructuring process. Last Friday, the developer sold a state-owned rival company, China Overseas Land & Investment, its 26.7% ownership in Guangzhou Asian Games City for 1.3 billion yuan. However, the business announced on Monday that a $100 billion project in Malaysia would proceed.
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