Though the amount was modest, failure to pay would have undermined fragile hope that China’s steady drip feed of policy stimulus was starting to stabilize the economy and its property market
China’s Country Garden made interest payments on U.S. dollar bonds hours ahead of a grace period deadline, a person close to the firm said, pulling back from the brink of default for the second time in four days and bringing some relief to the country’sChina’s largest private property developer failed to pay coupons on the bonds totalling $22.5-million due on Aug. 6, exacerbating fears over how much cash it has left and keeping markets on tenterhooks throughout the bonds’ 30-day grace periods.
Those bonds, issued by Country Garden and a unit, were set to mature and be puttable – an option given to bondholders to sell the notes back to the borrower at a fixed date – in 2023 and 2024, showed the documents sent to onshore creditors.The people familiar with the matter declined to be identified as they were not authorized to speak with media.
Country Garden’s cash squeeze highlights the fragile state of China’s real estate sector, which accounts for roughly a quarter of the economy and whose situation has deteriorated since a government campaign against high leverage began in 2021.Services sector activity grew at its slowest pace in eight months in August, a private-sector survey showed on Tuesday, as weak demand continued to dog the economy and stimulus measures failed to meaningfully revive consumption.
“Stimulus efforts to increase mortgage lending are welcome but a much larger package of support is likely to be needed to restore more confidence in the sector, and put exposed property firms on a firmer footing.” Country Garden has not missed a debt payment obligation, onshore or offshore. However, it flagged the risk of default should its financial performance continue to deteriorate after posting a record loss for the first half of the year.
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