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In the offshore market, Country Garden has at least five coupon payments due this month, including two relatively sizable dollar bond coupons worth US$15 million due on Sep 17, and US$40 million on Sep 27, each with a 30-day grace period.
Any default by Country Garden would exacerbate the country’s spiralling real estate crisis, put more strain on its struggling banks, and could delay the recovery of not only the property market but the overall Chinese economy.
CONTAGION RISK
Country Garden has so far shown a “higher willingness to stave off a default” than many of its peers, said Nicholas Chen, a Singapore-based analyst at research firm CreditSights.
Chen expects Country Garden to continue striving to defer due bond payments on both onshore and offshore markets and said Chinese regulators were likely involved with the developer due to “potential contagion risk to other upstream and downstream sectors, as well as the various local governments”.
Chinese authorities have rolled out a raft of support measures over the last few weeks for the heavily indebted property sector, including lowering existing mortgage rates and preferential loans for first-home purchases in big cities.
The property sector accounts for roughly a quarter of the Chinese economy and a recovery is crucial to Beijing’s plan to shore up the sputtering growth in the world’s second-largest economy.
New bank lending in China beat expectations by nearly quadrupling in August from July’s level, according to official data released on Monday, as the central bank sought to shore up economic growth amid soft demand at home and abroad.
China stocks rose on Monday, buoyed by fresh government policies to boost investor confidence, but property sector shares dropped. Shares in Country Garden fell 7.5 per cent ahead of the voting result.
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