Facing a possible financial collapse, struggling Chinese real estate developer Country Garden on Thursday denied rumors that its two most prominent executives had fled China.
Country Garden took the unusual step of issuing a statement on its WeChat social media account saying that Yang Guoqiang, the company’s founder, and his daughter Yang Huiyan, its chairman and majority shareholder, are “currently operating normally.” China work”. It said rumors that the pair had left the country had had a “detrimental impact” at a “difficult time” for the company.
The statement was released a day after the deadline for making a $15 million interest payment on a foreign bond. Failure to pay would allow creditors to declare the over-indebted company insolvent.
In a sign of China’s deepening housing crisis, Country Garden, once the country’s largest homebuilder, is struggling to stave off collapse amid a sharp drop in sales. In recent months, the company has shed assets and sold shares to raise cash to pay down its significant debts.
Last week, Country Garden, which has $187 billion in liabilities, said it expects to miss repayments on its foreign debt, fueling speculation that the company is preparing for a default on its loans. The company said the real estate collapse had put “significant pressure” on its liquidity position.
Since that announcement, investors have been watching closely to see whether Country Garden would make an interest payment on a dollar-denominated bond due 2025. The company had already missed the original deadline for payment last month and had then given a 30-day grace period to deliver the missing funds.
In a report Wednesday, research firm CreditSights said holders of that bond have not yet received any payment.
“The road to restructuring is likely to be long and bumpy,” CreditSights wrote, referring to Country Garden.
A spokeswoman for Country Garden declined to comment on whether or not the payment was made.
Country Garden may now face a similar fate to China Evergrande, which filed for bankruptcy in August and is negotiating with creditors to restructure its debts. The two companies once competed to be China’s largest non-state real estate developer, but now they are scouring their assets for ways to repay some of their debts to their creditors.
Evergrande also faces other problems. The company announced last month that Hui Ka Yan, its chief executive and billionaire founder, was suspected by authorities of criminal wrongdoing. Evergrande’s statement appeared to confirm reports that Mr. Hui was under some sort of house arrest by Chinese authorities. Other current and former Evergrande executives are now involved in criminal investigations in China.
Market confidence in the Chinese real estate industry has plummeted. The government reported on Wednesday that investment in real estate development fell 9.1 percent in the first nine months of the year compared to the same period in 2022.
A default by Country Garden, once seen as a model of financial responsibility in a Chinese real estate industry awash with reckless borrowing, would underscore the depth and extent of China’s real estate crisis. Over the past three years, dozens of Chinese real estate developers have defaulted on their debts, but Country Garden has remained largely unfazed.
Country Garden has often been celebrated for the rags-to-riches story of its founder, Mr. Yang, a former farmer and construction worker who once said he was so poor as a child that he didn’t wear shoes for the first 17 years of his life .
Before the company’s shares went public in 2007, he transferred his controlling interest in Country Garden to his second daughter, Ms. Yang. She was once the richest woman in Asia with an estimated fortune of $29 billion.
Ms. Yang served as co-chairwoman of the company with her father until she took over as sole chairwoman in March. She continues to hold 53 percent of Country Garden’s shares.
In late July, as Country Garden’s financial problems deepened, Ms. Yang donated shares in the company’s services subsidiary worth about $800 million to a family charity run by her sister. The Hong Kong-based charity is committed to a wide range of causes, including supporting science, education and culture, and promoting rural revitalization in mainland China. A developer’s services arm to support existing homeowners often remains profitable even when demand for new homes slows.
Country Garden said last month that it still had to repay nearly $15 billion in debt within the next 12 months. As pre-sales of Country Garden’s unfinished apartments have collapsed, the company’s finances have deteriorated. It said it lost $7.1 billion in the first six months of the year. Pre-sales fell 44 percent in the first nine months of 2023 compared to the previous year.
Last week, Hong Kong-based Kingboard Holdings said it had taken legal action against Country Garden for missing payments on about $200 million of debt due in installments by the end of December. Last month, Country Garden raised $34 million by issuing new shares. The proceeds went to Kingboard, a materials and chemicals manufacturer with a real estate division that owes money to Country Garden.
Source : www.nytimes.com