- Country Garden’s Record Deficit Raises Default Concerns
- Failed Interest Payments and Debt Repayment Extension
- China’s Property Market Woes Impacting Economy
Country Garden, one of China’s largest real estate developers, is the most recent real estate titan to warn it may default on its debts.
The crisis-stricken company reported a record $6.7 billion (£5.2 billion) deficit for the first half of the year.
Country Garden stated in its statement that it was “extremely sorry for the poor performance.”
The announcement increases concerns regarding the post-pandemic recovery of the second-largest economy in the globe.
Country Garden also disclosed it had failed to make interest payments on bonds due this month. However, it added that there was still a 30-day grace period for payment.
It is also reportedly attempting to extend the repayment deadline for another bond.
The company warned that it may default on its debts “if the group’s financial performance continues to decline in the future.”
“The group may not be able to meet the financial covenants of these borrowings, which could result in default on these borrowings and cross-default on other borrowings,” Country Garden stated in a Hong Kong regulatory filing.
The corporation warned earlier this month that the first half may lose $7.6 billion. The record loss was at the lower end of the company’s estimated range of 45 billion to 55 billion yuan ($6.2 billion to £4.9 billion).
On Thursday morning in Hong Kong, Country Garden shares were trading about 1% higher.
Problems in China’s property market, which encompasses everything from the construction of homes to the manufacture of products for them, are having a significant effect on the economy, as it accounts for approximately one-third of the total.
China’s real estate business was shaken by 2020 restrictions limiting major firms’ borrowing.
Evergrande, once China’s top-selling developer, amassed more than $300 billion in obligations as it aggressively expanded to become the country’s largest company.
Its financial problems have reverberated throughout the country’s real estate industry, with several developers defaulting on their obligations and abandoning unfinished construction projects.
Evergrande reported a 33 billion yuan loss for the first half of the year over the weekend.
On their first day of trading in Hong Kong after a year and a half, its shares dropped by nearly 80% on Monday.
Due to Beijing’s real estate crackdown, Evergrande shares have lost over 99 percent of their value in three years.
China faces additional issues, such as sluggish economic growth, soaring local government debt, and record-high youth unemployment.
Thursday’s official data revealed that factory activity in China declined for the fifth consecutive month.
In August, the Purchasing Managers’ Index registered 49.7. It was a month-over-month improvement, but remained below 50, indicating contraction.
