China’s embattled property giant, Country Garden, has submitted a preliminary offshore debt restructuring proposal to creditors, as it strives to avoid liquidation amid mounting financial pressures, Reuters reports.
The company, once the largest developer in China, faces a crucial court hearing on January 20, 2025, where it will seek to delay liquidation proceedings and implement a restructuring plan.
Sources familiar with the matter revealed that Country Garden’s proposal, submitted late last month, includes a revised cash flow projection that anticipates weaker financial performance than previously forecasted. This updated projection forms part of the restructuring framework, which is designed to demonstrate the company’s ability to repay creditors. However, details of the revised cash flow outlook have not been disclosed.
The move follows Country Garden’s failure to meet its previous cash flow estimates and comes after the company defaulted on $11 billion of offshore bonds late last year. Since then, the company has been working to negotiate with creditors in an attempt to stave off liquidation and return to financial stability.
In a statement following the publication of the Reuters report, a spokesperson for Country Garden confirmed the submission of the restructuring proposal, noting that negotiations were ongoing with both banking creditors and a group of US dollar bondholders. The company stressed that details of the plan could not be disclosed due to confidentiality reasons but emphasized its commitment to reaching agreements with its creditors as soon as possible.
The cash flow revision marks a significant development for Country Garden, which has been struggling with the broader downturn in China’s property market. Despite a series of government initiatives aimed at revitalizing the sector, the property slump has persisted, with official data showing that new home prices fell sharply in October — the most significant year-on-year decline since 2015. In addition, property investment in the first 10 months of 2024 dropped by 10.3%, indicating that the government’s support measures have so far had limited impact.
Since mid-2021, the Chinese property sector has been plagued by a debt crisis, with several major developers defaulting on their obligations, resulting in millions of unfinished homes and growing financial instability. Country Garden, a key player in the sector, has faced mounting pressure from creditors and has seen its shares suspended from trading since April 2024, pending the release of its financial results.
The company has been in talks with creditors about a potential “haircut” — where bondholders would accept less than the full value of the debt owed to them — as well as a debt-to-equity swap, which could see creditors take ownership stakes in the company in exchange for writing off a portion of the debt. This restructuring framework has been actively discussed in recent weeks as part of efforts to address the company’s substantial liabilities and avoid a court-mandated liquidation.
Country Garden’s financial struggles mirror the challenges faced by other property developers in China. Recently, Ever Credit Limited, a subsidiary of Hong Kong-listed Kingboard Holdings, filed a liquidation petition against Country Garden for non-payment of a $205 million loan. The company’s problems are compounded by the broader downturn in the real estate sector, where other major developers, including China Evergrande Group, have already been ordered into liquidation by the courts.
