12/6/2023 0 Comments China property developer default![]() One could speculate that some of those funds are already slated for curing the missed coupon payments.īut this doesn’t solve the “periodic liquidity stresses”.įor the remainder of the year, Country Garden needs to find US$2 billion of funds to satisfy other payments of principal and coupon on outstanding US dollar denominated bonds. ![]() The company’s chairwoman holds stakes in Country Garden Services, an affiliated entity and is expecting a dividend payment of around US$60 million this month. Pendal’s head of income strategies, Amy Xie Patrick On this occasion, Country Garden will probably find enough money to pay the coupon within the 30-day grace period. If Country Garden defaults on the bonds, it’s likely creditors on their US dollar denominated senior unsecured bonds would stand behind onshore equity holders in the queue to get their money back. The market values these bonds at such low recovery rates because of rules in China that restrict foreigners from owning physical assets onshore. Now that two coupon payments have been missed, the probability of default has skyrocketed, causing bonds to dip further to 8c on the dollar, closing in on all-time lows seen last November. A high risk of default had been priced in. The market has been bracing for more trouble since a spate of property sector defaults in China during 2022 - including the high-profile default of Evergrande.Īt the end of July, Country Garden’s US dollar bonds were trading at 20% to 25% of face value. To avoid a default, Country Garden must find enough funds to meet coupon payments before the grace period expires. The bonds now enter a 30-day grace period. In other words, it’s running out of money. The company is described as facing “periodic liquidity stress” in a Reuters report. Privately-owned Country Garden - China’s biggest property developer based on last year’s contracted sales - missed US$22.5 million in payments on two bonds. China’s property sector woes continued this week as another big property developer found itself in trouble.
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