SCMP: Mainland Chinese developer Country Garden gets Hong Kong court-backed debt lifeline

(South China Morning Post) --Country Garden Holdings has cleared a major hurdle this week after securing approval for both its onshore and offshore restructuring plans, offering the embattled developer a lifeline amid mainland China' s property downturn.

Sources said the Hong Kong High Court on Thursday endorsed a proposal allowing the indebted developer, once the country' s largest homebuilder by sales, to extend repayment of US$17.7 billion in offshore debt. The creditors now have the option to swap their debt for shares, receive convertible bonds or accept new notes.

The company also disclosed that onshore bondholders had agreed to extend nine bonds worth 13.8 billion yuan (US$1.95 billion) on Wednesday. Domestic creditors were given the option to either sell the bonds back to the company at a discount, convert debt into equity or retain their claims as general creditors.

The two restructuring plans were expected to reduce Country Garden’s total debt by more than 90 billion yuan and significantly ease repayment pressure over the next five years, according to the company. It added that financing costs for most new debt instruments were expected to drop sharply – to between 1 per cent and 2.5 per cent.

The approval of the plans marked a new phase for the company, according to Liu Shui, director of corporate research at China Index Academy, a real estate research firm. “This could help to rapidly restore normal business operations,” Liu added.

Mainland China’s broader property market is in the fifth year of a slump, with economists predicting at least another two years of declining sales and falling home prices.

In November, China’s top 100 developers recorded a 36 per cent decline in sales from a year earlier, according to a Morgan Stanley report this week citing data from China Real Estate Information Corp.

In the same month, Country Garden sold homes worth a total of 2.35 billion yuan, 22 per cent lower compared with the same month last year, and a mere 4 per cent of the level seen in November 2020, before Beijing implemented the “three red lines” policy to cap developer leverage, triggering the market downturn.

In major cities like Beijing and Shanghai, where there were typically more job opportunities and higher housing demand, average second-hand home prices had fallen to early 2016 levels, erasing nearly a decade of gains, according to Centaline Property Agency.

Country Garden also announced leadership changes on Thursday, promoting president Mo Bin to co-chairman. Mo, 58, joined Country Garden in 2010 as an executive director after working at a state-owned construction firm for over 20 years.

Cheng Guangyu, 45, will succeed Mo as president. Cheng joined the company in 2007 and became an executive director in 2022.

Yang Huiyan, the daughter of founder Yeung Kwok-keung, known in mainland China as Yang Guoqiang, will remain chairman.