Country Garden Holdings Co, a significant property developer in China, has encountered a setback by failing to fulfill a coupon payment on a yuan-denominated bond for the first time, indicating a deepening financial crisis for the company, as reported by Bloomberg.
According to individuals familiar with the situation, the primary onshore subsidiary of Country Garden failed to make a payment of 96 million yuan ($13 million) on Tuesday for a 4.8 percent yuan bond scheduled to mature in 2026.
Despite being granted a 30-day grace period for the payment, concerns regarding a potential default are looming large for the struggling developer.
The failure to meet the payment obligation occurs against the backdrop of Country Garden’s ongoing financial turmoil, which has been compounded by a lawsuit filed seeking the liquidation of the company in offshore jurisdictions.
The challenges faced by the company were further exacerbated when a creditor petitioned a Hong Kong court to wind up the firm based in Guangdong province.
Country Garden’s financial distress is mirrored in its declining sales performance.
According to corporate filings, there has been a staggering 85 percent drop in contract sales in February compared to the same period last year, following a 75 percent decrease in January.
The developer’s inability to fulfill its financial commitments is heightening anxieties among homebuyers in China, who are now wary of investing in projects associated with developers facing defaults.
Amidst the upheaval, attention is now turning towards China Vanke Co., another major state-backed builder, which is currently engaged in negotiations with creditors to prevent a potential default.
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