Ping An denies reports it will take over beleaguered Country Garden and assume developer’s mountain of debts

Ping An Insurance (Group) has denied a Reuters report citing sources that Beijing has asked it to take over Country Garden Holdings and assume the beleaguered property developer’s debts, according to a filing by China’s largest insurer by market capitalisation with Hong Kong Exchanges and Clearing (HKEX) late on Wednesday.
Country Garden had 257.9 billion yuan (US$35.4 billion) of interest-bearing debt as of June 30, according to its latest interim report. Of that amount, less than half – or 118.5 billion yuan – were in foreign currencies including US dollar and Hong Kong dollar, mostly in senior notes and corporate bonds.

Its total liabilities stood at 1.3 trillion yuan versus 1.43 trillion yuan at the end of 2022.

Country Garden was in late October deemed to be in default for the first time ever after it did not pay US$15.4 million of dollar bond interest by the end of a 30-day grace period after missing the initial deadline of September 17.

“(Ping An) has never received any relevant proposals or requests from any relevant governmental authorities/agencies, and the company has no transaction plan [regarding Country Garden] or discussion in connection therewith,” the statement said. “As of today, the company (Ping An) does not hold any shares of Country Garden Holdings.”

The insurer’s shares closed 5.4 per cent lower at HK$38.50 (US$4.92) each in Hong Kong, while Country Garden’s rose by 12.16 per cent to HK$0.83 apiece on Wednesday.

In the first six months of the year, Ping An reported a 1.2 per cent decline in net profit to 69.84 billion yuan. In the last two years, Ping An has raised its investments in rental income property while cutting its exposure to developers.

Of the insurer’s 4.37 trillion yuan investment portfolio at the end of last year, real estate accounted for 4.7 per cent, with 60 per cent invested in physical buildings, an increase of 10 percentage points from two years ago. The rest was in equities or bonds issued by developers or other property assets.

A liquidity crisis was triggered on the mainland after the government introduced its three red lines policy in August 2020 to stem systemic risk from overleveraged developers. Weak developers were shut out of the loan and bond markets, precipitating some US$29 billion of debt defaults since the start of 2021.
Although China’s property market has shown some signs that the worst may be over, home sales fell by 1.5 per cent in the first eight months of the year.

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