A Chinese default on its foreign debt looms

SYDNEY, Oct 18 (Reuters) – Country Garden Holdings (2007.HK), China’s largest private property developer, is hours away from defaulting on $11 billion in foreign debt, but has yet to make a coupon payment due on Wednesday to bond investors. .

The looming default, which would be the latest in dozens of Chinese developers to default, would deepen the crisis ravaging the real estate sector, which accounts for about a quarter of the world’s second-largest economy.

Country Garden will be considered in default on its foreign debt if it does not repay its $15 million bond in September 2025 by midnight in New York (0400 GMT).

Reuters reported that the payment had not been made as of early Wednesday. The company warned last week of its inability to meet its external debt obligations.

Country Garden did not immediately respond to a request for comment from Reuters on Wednesday.

The latest indication of the health of China’s faltering property market will become clear on Wednesday when property sales by floor area are scheduled to be published. National new home prices for September will be announced on Thursday.

With nearly $11 billion in external bonds and $6 billion in domestic loans, a Country Garden default would pave the way for one of China’s largest corporate debt restructurings.

Country Garden has also dropped other third-party payments in the past few weeks, although these have yet to see 30-day grace periods.

A default would open the way for Country Garden’s external creditors to begin negotiations with the company’s financial advisors to begin the restructuring process, which could take several months given the size of the debt.

A CreditSights report published on Tuesday found that state-linked Chinese developers still had access to financing markets while private companies struggled the most to obtain new capital.

The report said: “As homebuyers continue to be biased towards state-linked developers, privately run developers who have not yet defaulted are likely to find survival increasingly challenging, as they are pressured by insufficient contracted sales generation and lack of access. To financing.

Our standards: Thomson Reuters Trust Principles.