The clock is ticking on Chinese developer Country Garden Holdings Co. to avoid what would be its first default.
The builder that has about $187 billion of total liabilities — making it among the most indebted property firms in the world — must pay a combined $22.5 million in dollar note interest within a grace period that ends Sept. 5-6. That’s the next major test after it honored some coupon payments in recent days and secured an extension on some yuan obligations.
The moves came amid a broader rally for Chinese developers, after authorities late last week tweaked policy to allow the largest cities to cut down payments for homebuyers. “Despite the ringgit coupon repayment and the extended onshore bond, we do not believe that Country Garden’s funding conditions have significantly improved, though the company might be incentivized to repay dollar bond coupons to avoid any cross-default,” said Zerlina Zeng, senior credit analyst with CreditSights. “The ability of Country Garden and most privately-owned developers to stay afloat still hinges on a meaningful and sustained recovery of home sales, which we still view as challenging.
The developer’s coupon payment of the ringgit bond ignited some hope that it may pay the dollar interest within the grace period, according to Ting Meng, a senior credit strategist at Australia & New Zealand Banking Group. But in the longer term, the firm still faces challenges including weak contract sales and resistance from the market to further lending, she said.
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