Country Garden, China’s largest property developer, reported a record net loss of CNY48.9 billion for the first half of 2023, its first red figure since publicly listing in 2007 as the company teeters towards default, underscoring the financial strains in the country’s property sector. The CNY48.9 billion loss compares with a gain of CNY612 million a year earlier, according to a filing to the Hong Kong stock exchange. Its cash balance shrank by 21% to CNY101.12 billion from CNY123.48 billion a year ago as the company grapples with missed coupon payments and seeks an extension of an onshore bond repayment. The cash position will be insufficient to service the company’s CNY1.19 trillion of liabilities, although the sum is 3.3% lower than a year ago. Short term debt obligations, or those maturing in less than a year, rose 31% to CNY69.52 billion, highlighting the urgency of the situation. The wobbles in China’s property industry, once a pillar in the nation’s USD18 trillion economy, are already inflicting losses elsewhere. Growth has tapered off and could soon be a drag on the economy, while developers fell behind on their debt repayments.
President Mo Bin said in the filing that it will continue to negotiate with banks and other bondholders to delay repayments. “The directors of the company have assessed that the group was in compliance with these financial covenants as at 30 June 2023,” Mo said in the company statement. “However, if the financial performance of the group continues to deteriorate in future, the group might not be able to fulfill the financial covenants of these borrowings, which may result in default in these borrowings and cross-default in certain other borrowings.” Country Garden has taken steps to cut its debt burden, including a HKD270 million equity issuance to offset a loan. Earlier, Country Garden announced an equity financing project to raise about HKD270 million by issuing about 350.6 million shares at HKD0.77 each. The company will not receive any cash from the proceeds. The shares issued will be used to set off payments it owes to the subscriber, which is wholly owned by Kingboard Holdings. Country Garden has been struggling for nearly a month to avoid a potential default on onshore and offshore bonds.
Once China’s largest developer in terms of sales, it missed two U.S. bond coupon repayments earlier this month worth USD22.5 million, and later suspended trading in 11 onshore bonds, spurring concerns of a new crisis in China’s property sector. It still faces the repayments within a 30-day grace period that ends this week. Country Garden recorded the biggest drop in contracted sales among China’s major developers in July. The developer and its subsidiaries face more than USD2.5 billion in coupon payments and maturities in onshore and offshore debt before the end of this year, according to an analysis by JPMorgan. It had USD194 billion worth of liabilities in total at the end of 2022, about half of which were presale deposits from homebuyers, according to Barclays, the South China Morning Post reports.
