Country Garden’s missed payment comes on the heels of an investigation into the chairman of beleaguered peer China Evergrande, which has also defaulted and has been at the centre of the sector’s debt crisis.
Shares in Country Garden have lost some 70 per cent of their value this year but gained some ground on Wednesday, rising 2.7 per cent.
Its dollar bonds are currently worth about 6 cents compared with 70 cents at the start of the year, according to LSEG data, and bondholders say they expect the debt to be restructured.
“I think Country Garden offshore US dollar bond pricing speaks for itself as to the current expectations,” said Real Estate Foresight co-founder Robert Ciemniak who publishes on Smartkarma.
A US asset manager holding Country Garden’s dollar bonds added: “We are ready to walk away with some losses, but just hope the restructuring process could be efficient and less painful when compared to other companies like Evergrande.”
The asset manager declined to be identified.
Country Garden is, however, in better shape with its onshore debt, having gained some breathing room with three-year payment extensions for eight bonds worth 10.8 billion yuan (US$1.5 billion).
China has rolled out a flurry of support measures in recent months to revive the property market but private developers are still struggling to source new capital, according to a CreditSights report published on Tuesday.
“With homebuyers still biased towards state-linked developers, those privately-run developers still not yet in a default would likely find staying afloat an increasingly challenging prospect, squeezed by both insufficient contracted sales generation and funding inaccessibility,” the report said.
China’s bleak property market outlook is likely to worsen the terms that offshore creditors may have to accept as debt is restructured.
Data on Wednesday showed property investment in China slid 9.1 per cent for the first nine months of the year. Sales by floor area dropped 7.5 per cent.
Nationwide prices of new homes for September will be released on Thursday. August data showed a 0.3 per cent drop month on month, the fastest pace in 10 months.
Developers accounting for 40 per cent of Chinese home sales have defaulted on their debt obligations since 2021, according to JPMorgan. Those companies, mostly private, have issued around US$110 billion worth of high-yield offshore bonds.
Hong Kong’s Hang Seng Mainland Properties Index is down 40 per cent so far this year.