Country Garden pushes back vote to delay payments, as China rolls out more support

Embattled Chinese developer Country Garden is delaying a deadline for creditors to vote on whether to postpone payments for an onshore private bond, Bloomberg reported on Thursday, while Beijing rolled out more support measures for the property sector.

The vote on the 3.9 billion yuan (US$535.4 million) onshore private bond is a key hurdle Country Garden will have to overcome as it strives to avoid default amid a spiralling financing crisis and opposition from some creditors.

The voting was due to conclude by 10pm Hong Kong time. The voting was to be held via private meetings and it is unclear how quickly the results will be made available to the bondholders.

Bloomberg reported that Country Garden is pushing the deadline by one day to 10pm Beijing time on Friday, citing filings to the Shanghai Stock Exchange’s private disclosure platform seen by the news agency.

03:12

A look into China’s real estate market: unpaid workers and silent construction sites

A look into China’s real estate market: unpaid workers and silent construction sites

Country Garden could not immediately be reached outside Asia business hours.

Country Garden is China’s largest private developer. The company’s mounting woes are the latest to hit the property sector and have sparked fears of financial system contagion at a time when the country is already struggling with a broader economic slowdown.

The property sector, which accounts for roughly a quarter of the economy and is now grappling with a debt crisis that has rattled global markets, has been on a downward spiral since 2021 after Beijing cracked down on debt accumulation by developers.

“A slowdown in China is mostly priced into global markets but a real recession of the world’s second-largest economy is not ideal for anyone,” said Matthew Pestronk, president and co-founder of Post Brothers, a Philadelphia-based real estate development firm.

Hang Seng suffers worst month since February on China manufacturing, debt woes

As concerns mount about the crisis taking a growing toll on the country’s economy, weighing on consumer confidence and scaring investors, the Chinese government has rolled out a string of support measures in the last few days.

In the latest move, the People’s Bank of China, the country’s central bank, on Thursday announced the lowering of existing mortgage interest rates for first-time homebuyers as well as the down payment ratio in some cities.

While it did not specify the size of existing mortgage rate cuts, the central bank said the down payment ratio for first-time home purchases should be no lower than 20 per cent, and no lower than 30 per cent for second-home purchases.

Currently, most major cities have about a 30 per cent down payment ratio for first homes, and 40 per cent or more for second homes.

Separately, two more major cities said they would allow people to take preferential loans for first-home purchases regardless of credit records after two other top-tier cities, Guangzhou and Shenzhen, made similar moves on Wednesday.

Goldman Sachs said in a note it sees “a high possibility” that more big cities will follow suit in easing mortgages.

If the move was broadly implemented in large cities it “may provide a modest growth impulse to the property market”, although the magnitude was likely to be measured, it said in the note.

Adding to the property sector’s woes, Moody’s slashed the credit ratings of Country Garden by three notches to Ca from Caa1 on Thursday due to worries the firm could be on the brink of default.

“The rating downgrades with negative outlook reflect Country Garden’s tight liquidity and heightened default risk, as well as the likely weak recovery prospects for the company’s bondholders,” said Moody’s Senior Vice-President Kaven Tsang.