Country Garden submits offshore debt restructuring plan to creditors, sources say

Kingboard Holdings

18/11/2024 05:22

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      Debt revamp proposal presented to offshore creditors last
month
    

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      Proposal projects lower cash flow compared to previous
forecast
    

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      Country Garden faces next liquidation court hearing on
Jan. 20  
  
    

  
 (Adds debt restructuring details and background in paragraphs
14-18)
    By Xie Yu and Clare Jim
       HONG KONG, Nov 18 (Reuters) - China's Country Garden
 2007.HK  submitted the preliminary terms of an offshore debt
restructuring proposal to some creditors late last month, said
five sources familiar with the matter, as the struggling
property developer tries to avoid liquidation.
    The proposal includes a revised cash flow projection, said
two of the sources who have direct knowledge and another person
familiar with the matter, a standard part of a debt
restructuring process to show to creditors the firm's ability to
meet its obligations.
    The projection shows the developer expects a weaker cash
flow in coming years compared with the estimates it had shared
with some offshore creditors earlier this year, two of the
sources said.
    Details of the cash flow projection were not immediately
known.
    A spokesperson for Country Garden did not respond to Reuters
request for comment. 
    The sources declined to be identified as they were not
authorised to speak to the media.
        Once China's biggest developer, Country Garden defaulted
on its $11 billion in offshore bonds late last year and is
fighting a liquidation petition in Hong Kong. The next court
hearing has been set for Jan 20, 2025.
    Country Garden's downward revision of the cash flow outlook
comes after the government rolled out a raft of measures over
the past year to revive the property sector, which has slumped
in recent years as developers succumbed to a mountain of debt.
    China's new home prices fell the most year-on-year in
October since 2015, while property investment declined 10.3% in
the first 10 months of 2024, official data showed on Friday,
suggesting the support measures have had little impact so far.
    The finance ministry last week introduced new tax incentives
to further lower the cost of home purchases and spur demand --
its latest support effort. China also cut benchmark lending
rates by 25 basis points in October to try to boost demand.
    At a hearing in July, Country Garden told the Hong Kong High
Court that it expected to publish the term sheets for a revamp
of its offshore debt to creditors in September and that it
planned to seek approval from the court on that arrangement
early next year. The company missed the September deadline.
    
    RESTRUCTURING FRAMEWORK 
    If Country Garden can gain support from its key creditors
for the restructuring proposal before the January court hearing,
it would pave the way for the company to seek more time from the
court to implement a restructuring plan.
    PJT Partners  PJT.N , a financial adviser representing the
main group of Country Garden's offshore bondholders for the debt
restructuring talks, declined to comment.
    Ever Credit Limited, a unit of Hong Kong-listed Kingboard
Holdings  0148.HK , filed the liquidation petition against
Country Garden in February for non-payment of a $205 million
loan.
    Country Garden and some of its offshore creditors have in
recent weeks actively discussed a restructuring framework that
covers potential haircuts that the bondholders will have to take
and a debt-to-equity swap, according to one of the sources.
    Its shares have been suspended from trading since April
pending the release of 2023 full-year and 2024 interim results.
In an exchange filing this month, Country Garden said contracted
sales for October fell 31% to around 4.33 billion yuan ($598
million).
    Many Chinese property developers have defaulted since the
sector slipped into a debt crisis in mid-2021, resulting in
millions of uncompleted homes across the country.
    Some are facing liquidation lawsuits filed by creditors,
with the latest being state-backed Sino-Ocean Group  3377.HK . A
handful, including sector giant China Evergrande Group
 3333.HK , have been ordered to be liquidated so far.
 ($1 = 7.2363 Chinese yuan renminbi)

 (Reporting by Xie Yu and Clare Jim, additional reporting by
Scott Murdoch in Sydney; Editing by Sumeet Chatterjee, Neil
Fullick and Muralikumar Anantharaman)
 ((Yu.Xie@thomsonreuters.com;))