Country Garden's cash was under pressure, and 9 domestic bonds were extended for three years, actively promoting overseas debt management

Our reporter Liang Baoxin and Li Beibei reported from Shenzhen

On the morning of October 10, Country Garden issued an announcement on the Hong Kong Stock Exchange that the Group is facing major uncertainties 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 and medium term.

In addition, Country Garden also stated in the announcement that as of the date of this announcement, the Company has not paid the principal amount of HK$470 million under a debt. The Company also does not expect to be able to meet its obligations to repay all of its 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 10, Country Garden told the China Times reporter that it will actively promote overseas debt management measures, and formulate overall solutions to achieve long-term and sustainable capital structure in a fair and just manner under the premise of respecting the existing legal status and legal repayment order of all creditors.

It is worth mentioning that not long ago, Country Garden's nine domestic bonds with a total principal amount of about RMB 14.7 billion were successfully rolled over in about one month. In this regard, some insiders told reporters that Country Garden's overall solution to overseas debt is within market expectations, and this overall arrangement is easier to be recognized by market institutions.

The cash position remains significantly under pressure

According to Country Garden's unaudited operating data, from January to September 2023, Country Garden realized equity sales of approximately RMB154.98 billion (RMB, the same below), down 43.9% year-on-year and 65.4% year-on-year from 2021. Among them, the monthly equity sales amount in September 2023 was about 6.17 billion yuan, which decreased for the sixth consecutive month, down 80.7% year-on-year and 86.5% from 2021.

In this regard, Country Garden pointed out in the announcement that due to the deep adjustment of China's real estate market, since entering 2023, the Group's sales have been under obvious pressure. At the same time, under the situation that the sales environment of the industry has not been significantly improved, the Group is facing significant uncertainty in the disposal and sale of assets, and it is expected that the Group's liquidity will remain tight in the short to medium term.

At the same time, Country Garden also said that in the face of phased flow pressure, various measures have been taken to alleviate the liquidity problem to minimize the interference to project construction and operation. According to the reporter, not long ago, in September, Country Garden 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 of the relevant bondholders. Country Garden once told reporters that the domestic debt rollover plan has bought time and space for the group to focus on resuming operations.

Specifically, after the suspension of trading of Country Garden's domestic bonds on August 14, "16 Biyuan 05" was the first to be voted by the bondholders' meeting on September 1, and the remaining eight bonds were voted by the holders' meeting on September 11, September 12 and September 18 respectively. In addition, Country Garden also announced on the evening of August 25 that it would sell its 26.67% stake in the Guangzhou Asian Games City project to an indirect wholly-owned subsidiary of China Overseas Land & Investment Co., Ltd., for a total consideration of about 1.292 billion yuan.

However, Country Garden also said in an announcement issued on the morning of October 10 that the Group's sales and financing are currently facing severe challenges, and the available funds on 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.

We will actively promote overseas debt management measures

As at 10 October, Country Garden had not paid the principal amount of HK$470 million due under a debt. Country Garden further stated in the relevant announcement, "The Company also expects to be unable to meet its repayment obligations on all overseas debts as scheduled or within the relevant grace period, including but not limited to the repayment obligations under the US dollar bonds issued by the Company." Such outstanding payments may result in the relevant creditor demanding accelerated performance of the relevant obligations or enforcement action. ”

According to incomplete statistics from the reporter, Country Garden currently has 15 US dollar bonds in the open market, with a principal of about US$9.3 billion.

Country Garden said that it will actively promote overseas debt management measures and formulate a fair and equitable overall solution to achieve a long-term and sustainable capital structure while respecting the existing legal status and legal repayment order of all creditors.

Country Garden has engaged China International Capital Corporation Hong Kong Securities Limited and Houlihan Lokey (China) Limited as financial advisers and Sidley Austin as legal counsel to help assess the Group's capital structure and liquidity position and develop an overall solution.

In addition, Country Garden also said in the announcement that it hopes to comprehensively solve the company's current overseas debt risks by seeking an overall solution, and exchange time for space, so that the company can have the opportunity to work hard with practical actions, turn the crisis into vitality, return to the track of benign development, and protect the rights and interests of all stakeholders including customers, employees and creditors to the greatest extent.

Ensure delivery as the highest priority business objective

Some insiders pointed out that the maturity time of Country Garden's 9 domestic bonds was extended by 3 years as a whole, and the pressure of spot payment of bonds was reduced, which gave the company time and space to concentrate on resuming operations. On the one hand, you can focus on your operations and avoid being overwhelmed with bond negotiations; On the other hand, the overall operating capital pressure has been alleviated, and valuable cash resources can be used for the development and construction of various projects, and resources can be concentrated to implement the task of ensuring delivery, entering a relatively virtuous development cycle.

In the announcement issued on the morning of October 10, Country Garden also stressed that the group regards guaranteed delivery as the highest priority business goal, and effectively guarantees the normal operation of the project and completes the task of guaranteeing the delivery of the building through special funds and strict management of pre-sale monitoring funds.

It is understood that Country Garden plans to deliver about 700,000 houses this year. According to public information, as of September 30, 2023, Country Garden and its joint ventures and associated companies have delivered a total of about 420,000 sets of houses during the year, with a cumulative delivery area of about 51.12 million square meters, and the delivery projects involve 31 provinces and 235 cities, and some projects have been delivered ahead of schedule.

In addition, Country Garden official Weiwei disclosed news on September 28 that in September, Chen Shaorong, secretary of the Shaoguan Municipal Party Committee in Guangdong Province, and Chen Zhiqing, mayor of Shaoguan, Guangdong Province, held a discussion with Mo Bin, president of Country Garden Group. Chen Shaorong mentioned that Country Garden has been stationed in Shaoguan for many years, and the two sides have established a relationship of mutual trust, and hope that on this basis, the two sides will maintain close communication and docking and accelerate the construction of existing projects. It is hoped that Country Garden will fully demonstrate the responsibility and deeds of China's leading private real estate enterprises and actively help the repair of the trust chain of the Shaoguan property market.

Mo Bin pointed out that in the future, before the market has not undergone major changes, all investment income of Country Garden in Shaoguan will be given priority to the development of the Shaoguan real estate market, and continue to maintain the healthy and upward real estate industry ecology of Shaoguan.

Responsible editor: Zhang Bei Editor-in-chief: Zhang Yuning