Country Garden Stock Jumps as Creditors Back Bond Extensions

Shares of Country Garden shot up on Tuesday after creditors gave approval for China’s largest private developer to extend repayments on six onshore bonds by three years.

The reprieve from holders of the group’s onshore bonds came as China’s financial policymakers loosen restrictions on the real estate sector.

Investors are closely monitoring whether the government’s latest stimulus measures such as lowering existing mortgage rates and offering preferential loans for first-home purchases in big cities will bolster consumer confidence and sow the seeds for an eventual property market recovery.

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Monday night votes on six onshore bonds

Country Garden’s onshore creditors voted on Monday for proposals by the distressed developer to extend repayments on eight onshore bonds worth 10.8 billion yuan ($1.48 billion) by three years, sources said, marking the latest relief to China’s crisis-hit property sector.

In the voting, which concluded by 10pm Hong Kong time (1400 GMT) on Monday, creditors approved extending six out of the eight bonds, the two sources said.

Voting on the two other bonds will be delayed, the two sources said, asking not to be named, as they were not authorised to speak with media. Country Garden did not immediately reply to a request for comment.

The company’s Hong Kong-listed shares jumped by 10% in the morning, after the news, before edging down to a gain of just under 6% in afternoon trading.

However the stock is down nearly 60% since the start of the year. The broader Hang Seng Mainland Properties Index also reversed earlier losses and was up by 0.75%.

The latest voting came after Country Garden on September 1 gained approval from creditors to extend payments by three years for a 3.9 billion yuan ($533 million) onshore private bond.

It also made a last-minute dollar coupon payment offshore last week to avoid a immediate default.

Five payments due on offshore bonds this month

Country Garden, one of the few large Chinese developers that has not defaulted on debt obligations, has faced liquidity pressure with reduced available funds as sales plunged, its interim financial statements showed.

It has 108.7 billion yuan ($14.9 billion) of debts due within 12 months, while its cash level are around 101.1 billion yuan as of end-June, according to the company’s interim financial statement.

In the offshore bond market, Country Garden has at least five coupon payments due this month, including two relatively sizable dollar bond coupons worth $15 million due on Sept 17, and $40 million on Sept 27, each with a 30-day grace period.

Any default by Country Garden would exacerbate the country’s spiralling real estate crisis, put more strain on its struggling banks and could delay the recovery of not only the property market, but the overall Chinese economy.