Country Garden 'Aiming for $11bn Offshore Debt Plan by Year-End'

Embattled Chinese developer Country Garden wants to restructure its nearly $11 billion in offshore debt by the end of this year, sources say.

Country Garden – China’s biggest private property developer – fell into default in October, after failing to make a coupon payment.

The group, which has more than 3,000 projects, is keen to start negotiations with offshore bondholders by February or March next year.

They said the firm expects to inform key bondholders of its cashflow projections by year’s end, as part of the basis for the tentative restructuring plan. The sources declined to be identified as the matter was confidential, while the firm itself declined to comment.

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The timeline for the company’s debt restructuring plan has not been reported before.

Country Garden has been in the spotlight since August when its debt woes became public, rattling markets and forcing Beijing to roll out more support measures for the property sector.

It has joined a long list of Chinese property developers that are either working on debt restructuring proposals or have presented them to creditors after having defaulted on offshore debt over the past two years.

Earlier this week Reuters reported that Chinese authorities have asked domestic financial behemoth Ping An Insurance Group to take a controlling stake in Country Garden. That report was denied by Ping An.

A state-engineered rescue of Country Garden would be one of the most significant interventions to date by authorities to support the cash-squeezed and highly indebted property sector, which accounts for a quarter of China’s economy.

The two sources, who have no information on the bailout talks, said some Country Garden bondholders do not expect a higher recovery rate on their investments even if such a deal were to eventuate.

Advisers begin due diligence

Offshore bondholders sought urgent talks with Country Garden after it did not pay the $15 million coupon on October 18 – the end of a 30-day grace period, sources with direct knowledge of the matter have said.

CreditSights said in a November 2 research note that Country Garden had “formally defaulted” on its offshore bonds due to the missed payment.

The company has been privately communicating with some bondholders about its efforts to formulate a debt repayment plan since then, the sources said.

Country Garden said on October 10 that it had appointed CICC, Houlihan Lokey, and law firm Sidley Austin as advisers to examine its capital structure and liquidity position and formulate a “holistic” solution to repay its offshore debt.

CICC did not immediately respond to queries, while Houlihan and Sidley Austin declined to comment.

The advisers have begun due diligence on Country Garden’s financial condition, including looking at cashflow for onshore projects, the two sources and a separate source familiar with the matter said.

As yet, few Chinese property developers have reached agreements on debt repayment plans.

Sunac China Holdings in October became the first to complete the debt revamp scheme for its $9 billion offshore debt after winning approval from creditors and courts.

Bigger rival China Evergrande, however, saw its initial $23-billion offshore debt restructuring plan thrown off course in September after Chinese authorities launched an investigation into its billionaire founder Hui Ka Yan and a flagship unit.