Country Garden Proposes $11.6 Billion Debt Reduction Deal
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Country Garden, once China's largest property developer, has proposed a deal to its offshore creditors that would slash its debt by $11.6 billion, Reuters reports. This move aims to secure more time from the Hong Kong high court to implement a restructuring plan.
The deal, reached with a group of seven banks, comes ahead of the company's liquidation hearing scheduled for January 20. It represents a significant step toward restructuring Country Garden's substantial offshore debt.
The developer defaulted on $11 billion in offshore bonds in late 2023, exacerbating a debt crisis in China's property sector that has already seen defaults from several other developers, including Evergrande. Country Garden had $16.4 billion in total offshore debt at the end of 2023, encompassing $10.3 billion in bonds and $3.6 billion in syndicated loans. Both are covered by the proposed restructuring.
The proposal offers creditors various options, including a debt-to-cash conversion with a 90% haircut or the issuance of new debt instruments with extended maturities. Some options involve extending the maturity by up to 11.5 years and the issuance of mandatory convertible bonds and new debt instruments.
"The company is particularly pleased with the interest shown by certain banks in supporting the company over the long term to navigate current challenges," Country Garden stated in its announcement.
The company also revealed that its controlling shareholder, Chairperson Yang Huiyan, is considering converting her $1.1 billion outstanding shareholder loan into equity. Negotiations regarding the final terms of the proposal are ongoing.
Country Garden's December contracted sales plunged 50% year-on-year to 6.91 billion yuan ($942.43 million), according to a regulatory filing. A prolonged property market slump has weighed heavily on developers' ability to repay debt.
The news follows reports that another developer, Sunac China, has informed some of its offshore creditors that it is unlikely to meet a September maturity deadline for its restructured bonds. This raises the prospect of a new wave of offshore debt restructuring in the property sector.
Country Garden will hold a board meeting on Tuesday to approve its overdue 2023 audited annual results and 2024 unaudited interim results. The company's shares have been suspended since April 2, 2024, pending the release of these financial results.