Per reporter: Huang Wanyin Per editor: Wei Wenyi
On October 10, Country Garden (HK02007, stock price HK$0.840, market value HK$23.510 billion) announced that the Group is facing significant uncertainty in the disposal and sale of assets under the situation that the sales environment of the industry has not been significantly improved, and it is expected that the Group's liquidity will remain tight in the short to medium term. As at the date of this announcement, the Company has not paid the principal amount of HK$470 million under a debt and will actively promote overseas debt management measures.
"The Company also does not expect to be able to meet its obligations on all offshore debts, including but not limited to those under the US dollar bonds issued by the Company, on time or within the relevant grace period. Such outstanding payments may result in the relevant creditor demanding accelerated performance of the relevant obligations or enforcement action. ”
On October 9, the reporter of "Daily Economic News" learned from people familiar with the matter that Country Garden is preparing for overseas debt restructuring.
According to incomplete statistics from each reporter, Country Garden Holdings Co., Ltd. currently has at least 15 US dollar bonds in the existing period, and there will be 2 US dollar bonds due in January and April 2023, with outstanding balances of US$956 million and US$537 million respectively. COGARD 4.5 12/05/23 (ISIN:XS1914667057) expires on 5 December this year with a duration of HK$3 billion.
Country Garden said in the announcement that the company will fairly and equitably develop overall solutions to achieve a long-term and sustainable capital structure, while respecting the existing legal status and legal payment order of all creditors. The Company attaches great importance to the management of this offshore debt and the interests of all creditors, and kindly requests creditors to allow time for the Company to objectively assess the current challenges and work with its advisors to develop the best pragmatic and feasible solutions for all stakeholders.
Image source: Country Garden's October 10 announcement
The rollover of onshore bonds has been approved
Country Garden said that in the face of liquidity pressure, the Group has taken various measures to mitigate it to minimize the impact on project construction and operation. Through active debt management actions, the Group continues to try to optimize the structure of existing debt to ensure that the interests of all investors are protected to the greatest extent. The long-term healthy development of the Group requires extensive support, and the Group has done its best to respond positively and made positive progress in domestic debt management.
As at the date of this announcement, Country Garden's total of nine rollover plans for domestic corporate bonds with a total principal amount of approximately RMB14.7 billion have obtained the necessary consent from the relevant bondholders, giving them time and space to concentrate on resuming operations.
Not long ago, Country Garden's domestic debt rollover has been fully approved. On the evening of September 20, Country Garden Property Group Co., Ltd. (hereinafter referred to as Country Garden Real Estate) issued an announcement on major matters of corporate bonds.
In September, Country Garden Property held a meeting of holders on the rollover of seven existing corporate bonds (hereinafter referred to as "rollover bonds") to consider the proposal to adjust the principal and interest payment arrangement of the bonds and add credit enhancement protection measures (hereinafter referred to as the extension proposal).
As of 12 September 2023, all seven rollover proposals of Country Garden Bonds have been voted by the bondholders' meeting, including H19 BIDI 3, H20 BIDI 3, H20 BIDI 4, H1 BIDI 01, H1 BIDI 02, H1 BIDI 03 and H1 BIDI 04.
Country Garden Real Estate said that the completion of the above seven rollover bonds can effectively alleviate the company's liquidity pressure, help improve the company's overall financial status, and stabilize the company's production and operation. The company will go all out to do a good job in production and operation, actively fulfill its debt repayment obligations, and return to a benign development track.
On August 18, Country Garden announced the first domestic bond rollover plan, 16 Biyuan 05 principal extension for three years, each account first repayment of 100,000 yuan, in the 1st, 2nd and 3rd months after the maturity of the bond to pay 2% of the principal, the 12th month of the principal to pay 10% of the principal; 15% of the principal in the 24th month, 25% in the 30th month, and 44% in the 36th month. On 2 September, the extension plan was approved. Since then, Country Garden's other exhibition plans have been carried out according to the "16 Biyuan 05" plan.
On September 2, every reporter learned that from August 29, 2023 to September 1, 2023, Country Garden Holdings Limited held the second bondholder meeting in 2023 for its 2016 non-public issuance of corporate bonds (Phase IV) (Variety 2). Among them, the "Bill on Adding a 40 Natural Day Grace Period" was passed.
The bonds involved this time are 16 Biyuan 05, with a total issuance scale of 5.83 billion yuan, a term of 7 years, a current balance of 3.904 billion yuan, and a coupon rate of 5.65% for the current period, with the issuer's option to increase the coupon rate at the end of the fifth year and the option for investors to sell back.
According to the plan, the principal payment time of all bondholders of the current bond will be adjusted from September 2, 2023 to September 2, 2026. 16Biyuan 05 principal is extended for three years, each account will repay 100,000 yuan first, 2% of the principal in the 1st, 2nd and 3rd months after the maturity of the bond, and 10% of the principal in the 12th month; 15% of the principal in the 24th month, 25% in the 30th month, and 44% in the 36th month.
In addition, the plan also adds credit enhancement protection measures, pledging and guaranteeing the equity of project companies such as Longyan, Jiangsu Shuyang, Haiyang, Huai'an, and Xinghua.
Go all out to "ensure delivery"
Country Garden pointed out in this announcement that in the face of the current difficult situation, the Group remains united and continues to make every effort to fulfill its repayment obligations. Since 2020, the Group's cash flow from financing activities has continued to have a net outflow, and under the extremely difficult financing environment, the Group has insisted on fulfilling its repayment obligations through sales collection and existing cash resources. However, at present, the Group's sales and financing are facing severe challenges, and the available funds on the books continue to decrease.
"Although the Group has made every effort to explore different options to raise cash flow, including asset disposal, to continue to meet its financial commitments, it is still difficult to quickly replenish sufficient cash flow in the short term to improve liquidity under the current market environment, resulting in the Group's cash position remaining significantly under pressure."
On August 30, Country Garden disclosed the 2023 interim performance report showing that the operating income in the first half of the year was 226.3 billion yuan, a year-on-year increase of 39.38%; The gross loss was about 24.26 billion yuan, and the core net loss attributable to shareholders of the company was about 45.35 billion yuan.
Image source: Country Garden 2023 Semi-Annual Report
"The company felt very guilty in the face of this unsatisfactory answer sheet in front of us. However, while introspecting, the company must firmly look forward and shoulder the responsibility of corporate social responsibility. ”
Country Garden said in the performance report that since 2021, the external environment of the real estate industry has undergone tremendous changes, and although the company has predicted the current round of adjustment cycle, the depth and duration of the market downturn still exceeds expectations. "The company's failure to make more vigorous response measures as soon as possible, its failure to gain insight into the major changes in the supply and demand relationship in the real estate market, its lack of understanding of potential risks such as the excessive proportion of investment in third- and fourth-tier cities and the insufficient rate of debt ratio reduction, and the lack of timely and effective mitigation actions have all caused the company to face the greatest difficulties since its establishment."
In the first half of the year, Country Garden turned from a profit to a loss year-on-year, on the one hand, due to the continuous decline in sales volume and sales prices in the real estate market in the second quarter of this year, the net impairment provision for properties under construction and completed properties sold for sale was about 40.3 billion yuan, resulting in a gross loss of about 24.3 billion yuan; On the other hand, due to the combination of multiple adverse factors such as the macroeconomic environment, industry environment and negative financial position of counterparties, the net impairment loss of financial assets and contract assets was about RMB6.6 billion, and the net exchange loss due to foreign exchange fluctuations was about RMB3.0 billion.
Country Garden is also making every effort to enhance sales collection and explore different options such as asset disposal to raise cash flow, including the sale of its 26.67% stake in the Guangzhou Asian Games City Joint Project Company in August.
In this announcement, Country Garden also sorted out its series of actions to resolve debt risks, including grasping the sales window period brought by the new policy, and effectively doing a good job in sales and payment collection; Comprehensively inventory and sort out the group's assets, fully tap market-oriented opportunities to revitalize assets; To meet the needs of business development, further optimize the overall organizational structure of the group, and set up a special working group headed by the chairman of the board of directors to establish a flatter and more efficient work response mechanism, coordinate the promotion of major work, and reduce unnecessary expenditures; Do our best to open source and reduce expenses and improve the Group's cash flow position.
In fact, in the face of the extremely difficult situation of the industry as a whole, Country Garden has been actively working to repay its debt. Historical data shows that Country Garden's net cash flow in fundraising activities was positive from 2016 to 2019, but due to the deterioration of the overall financing environment, it showed a significant outflow from 2020 to 2022, with outflows of RMB54.136 billion, RMB12.904 billion and RMB58.688 billion respectively, net repayment for three consecutive years. According to the latest interim report, as of the end of June 2023, Country Garden's interest-bearing liabilities decreased by 4.9% from the end of the previous year to 257.9 billion yuan, and the net borrowing ratio was only 50.1%, continuing to maintain a low level in the industry. Under the extremely difficult financing environment, Country Garden insisted on fulfilling its repayment obligations through sales collection and existing cash resources, and the scale of interest-bearing liabilities continued to decrease.
Previously, on August 10, Country Garden released an insider information announcement that since 2021, the industry has entered an unprecedented difficult period, and multiple adverse factors have overlapped, resulting in severe difficulties and challenges in industry sales and public market financing. In the face of the extremely difficult situation of the industry as a whole, the company has made every effort to carry out self-help.
"Although the company has encountered the biggest difficulties since its establishment, we have always been full of confidence in the prospects of China's economy, and the real estate industry will eventually return to the track of healthy and stable development after this round of profound adjustment." Country Garden said that the company will actively implement the spirit of the Politburo meeting on July 24, shoulder the responsibility of large enterprises, and under the leadership of party committees and governments at all levels, make full use of relevant policies such as 31 articles of private economy and 16 articles of finance, base on the present, coordinate the resources of all parties, and go all out to ensure delivery and operation; It also focuses on the long term, steadily promotes various business strategies and risk mitigation measures, ensures the sustainable and healthy development of the company, and protects the legitimate rights and interests of investors.
[Every real estate original, like please pay attention to WeChat Real-estate-Circle]
Daily economic news