Country Garden says executives have not fled China | ET REALITY

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Facing a possible financial collapse, Chinese property developer Country Garden on Thursday denied rumors that its two top executives had fled China.

Country Garden took the unusual step of issuing a statement on its WeChat social media account declaring that Yang Guoqiang, the company’s founder, and his daughter Yang Huiyan, its president and majority shareholder, were “currently working normally in China.” She said rumors that the two had left the country were having “an adverse impact” during a “difficult period” for the company.

The statement was issued a day after the company faced a deadline to make a $15 million interest payment on a foreign bond. Failure to make payment would allow creditors to declare the indebted company in default.

In a sign of China’s deepening housing crisis, Country Garden, once the country’s largest homebuilder, is struggling to avoid collapse amid a sharp drop in sales. Over the past few months, it has been shedding assets and selling shares to raise money to meet its significant debt obligations.

Last week, Country Garden, with $187 billion in liabilities, said it expected to miss a payment on its foreign debt, fueling speculation that it was preparing to default on its loans. The company said the real estate downturn had put its cash position “under significant pressure.”

Since that announcement, investors have been closely watching whether Country Garden would make an interest payment on a dollar-denominated bond due in 2025. The company had already missed the initial deadline to make the payment last month, and then had a 30 day grace period. deadline to deliver the missing funds.

In a report Wednesday, research firm CreditSights said holders of that bond had not yet received payment.

“The road to restructuring is likely to be long and bumpy,” CreditSights wrote, referring to Country Garden.

A Country Garden spokeswoman declined to comment on whether it had made the payment or not.

Country Garden could now face a fate similar to that of China Evergrande, which filed for bankruptcy in August and is negotiating with its creditors how to restructure its debt. The two companies once vied to be China’s largest non-state property developer, but are now sifting through assets for ways to pay back some of what they owe creditors.

Evergrande also faces a different set of problems. The company announced last month that Hui Ka Yan, its billionaire president and founder, was under suspicion by authorities for criminal wrongdoing. Evergrande’s statement seemed to confirm it reports that Mr. Hui was under a form of house arrest by Chinese authorities. Other current and former Evergrande executives are now embroiled in criminal investigations in China.

Market confidence in China’s real estate industry has fallen sharply. The government reported on Wednesday that investments in real estate development decreased by 9.1 percent in the first nine months of the year compared to the same period in 2022.

A default by Country Garden, once considered a model of fiscal responsibility in a Chinese property industry awash in reckless borrowing, would underscore the depth and scope of China’s property crisis. Over the past three years, dozens of Chinese property developers have failed to pay their debts, but Country Garden has largely stayed out of the fray.

Country Garden was often celebrated for the rags-to-riches story of its founder, Mr. Yang, a former farmer and construction worker who once claimed he was so poor as a child that he didn’t wear shoes during the years. first 17 years of his life. his life.

Before the company’s shares were listed in a public offering in 2007, he transferred his majority stake in Country Garden to his second daughter, Ms. Yang. At one point, she was the richest woman in Asia with a fortune estimated at $29 billion.

Ms. Yang served as co-president of the company with her father until March, when she took over the role exclusively. She still owns 53 percent of Country Garden shares.

In late July, as Country Garden’s financial problems deepened, Ms. Yang donated about $800 million in shares of the company’s services subsidiary to a family charity run by her sister. The Hong Kong-based charity works on a wide range of causes, including supporting science, education and culture, as well as promoting rural revitalization in mainland China. A developer’s services arm to support existing homeowners often remains profitable even if demand for new homes dries up.

Country Garden said last month it still needed to pay down nearly $15 billion in debt over the next 12 months. As pre-sales of Country Garden’s unfinished apartments plummeted, the company’s finances deteriorated. It said it lost $7.1 billion in the first six months of the year. Pre-sales fell 44 percent in the first nine months of 2023 compared to the previous year.

Last week, Hong Kong-based Kingboard Holdings said it had taken legal action against Country Garden for failure to pay about $200 million of debt that was due in installments at the end of December. Last month, Country Garden raised $34 million by issuing new shares, with the proceeds going to Kingboard, a materials and chemicals maker with a property division to which Country Garden owes money.

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