A CHINESE programme to backstop debt of distressed developers came within days of being tested for the first time, but averted fuelling debate about the fallout from such intervention after Country Garden Holdings paid bond interest.
The distressed developer paid interest totalling 65.95 million yuan (S$12 million) on its 3.95 per cent note and 3.8 per cent bond, according to its filings. The move came three days after the company’s onshore unit said it could not make coupon payments on the notes due May 9. Both notes are guaranteed by state-owned firm China Bond Insurance.
The payment raises questions about the outcome of talks between China Bond Insurance and Country Garden, given speculation that the guarantor would likely push issuers first to pay under this programme to avoid raising moral hazard issues. Any non-payment in this programme could open the door to more distressed borrowers not paying as they would not want to be seen being selective about which debts to pay.
Last week, Country Garden said it would try to pay within three working days, and that if it did not, the guarantor would step in if payments were not made.
China Bond Insurance is at the heart of a programme introduced by authorities in 2022 to help private-sector developers struggling with the country’s property debt crisis avoid liquidity crunches.
So far at least 33 bonds have been issued under the programme, with 33.7 billion yuan raised in total, according to data compiled by Bloomberg. No coupon payments have been missed on other bonds guaranteed under the programme. Some developers that have issued notes via the programme, such as CIFI Holdings Group, have defaulted on other bonds, but not those guaranteed by China Bond Insurance. BLOOMBERG
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