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Shares of Chinese property developer, Country Garden, experienced a nearly 20% rise on Monday following the approval from creditors to restructure the repayment of a renminbi-denominated bond that was due on Saturday.
The approval provides Country Garden with additional time to fulfill its domestic and international repayment obligations amid financial constraints.
Country Garden, a significant focus of international investors assessing China’s property sector, announced that it had obtained 56.08% approval from participating Chinese creditors in a voting process.
Creditors have granted an extension for a nearly Rmb4bn ($550mn) bond, allowing the developer to repay the debt in multiple installments over the next three years.
The news resulted in a 19.1% surge in Country Garden’s Hong Kong-listed shares on Monday. However, the stock remains down by over 60% year-to-date.
Country Garden, once considered one of the Chinese developers least likely to default, has faced challenges meeting recent repayment obligations. Around a month ago, it failed to make interest payments of $22.5mn on two $500mn international bonds, leading to a broader sell-off of shares in property groups already grappling with widespread defaults.
Following the Chinese authorities’ actions to lower downpayment requirements for first-time and second-time homebuyers, developer stocks listed in Hong Kong increased by as much as 10.5% on Monday.
Significant progress has been made in recent weeks to ease mortgage rules and encourage homebuyers after years of strict regulations to curb excessive leverage in the sector. Major cities, including Beijing, Shanghai, Guangzhou, and Shenzhen, decreased minimum mortgage interest rates for first-time homebuyers last week.
Ting Lu, an analyst at Nomura, believes that while the recent easing measures represent a significant step in stimulating the property sector, they are still insufficient to resolve its prolonged liquidity crisis.
Data from Dealogic reveals that Chinese developers are facing a $38bn wall of renminbi and dollar bond payments over the next four months, and Fitch Ratings warned of a potential up to 15% decrease in annual new home sales in China.
The rating agency also cautioned that Country Garden’s situation could further weaken Chinese homebuyers’ sentiment.
Country Garden, with liabilities of approximately Rmb1.36tn as of the end of the first half of 2023, faces additional repayment pressure this week as the grace period for the missed dollar bond payments a month ago is set to expire on Wednesday.
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