Amid its ongoing debt troubles, Country Garden Holdings, China's biggest property developer, has called for "guidance and support from the government."
The company, which recently signed a dual tranche loan deal, is facing significant bond maturities later this year and anticipates reporting a loss for the first half of 2023. In contrast, during the same period last year, Country Garden posted a net profit of approximately 1.90 million yuan (US$265 million) and a core net profit of around 4.91 billion yuan.
The expected net loss, as stated by the company in a filing to the Hong Kong stock exchange on Monday, is attributed to the decline in gross profit margin for its real estate business and an increase in impairment provisions for property projects due to the downward trend in real estate sales.
Even before the announcement of the expected loss, analysts had already begun downgrading their views on the company, which is 53% controlled by Chinese businesswoman Yang Huiyan.
HSBC analysts recently downgraded their recommendation on the company's bonds from "neutral" to "underweight," citing concerns over Country Garden's upcoming offshore debt repayment, requiring US$2 billion in total, with the peak maturities scheduled for December 2023 and January 2024. Additionally, the company faces significant onshore bond maturities in September 2023, with slightly over US$1 billion-equivalent due for repayment.
In response to the financial challenges, Country Garden stated that it is actively considering various countermeasures to secure its cash flow, including reducing operating expenses, accelerating loan collection arrangements, exploring additional financing channels, and optimizing debt repayment arrangements.
The situation highlights the current financial stress faced by some Chinese property developers, given the ongoing debt crisis in the industry. Country Garden's call for government support underscores the potential implications of the company's financial woes on the broader real estate sector and the need for measures to stabilize the market. As the situation evolves, the company's efforts to address its debt burden and manage cash flow will be closely watched by investors and industry stakeholders alike.
By fLEXI tEAM