Country Garden posted a record first-half loss of nearly $7 billion and warned of a possible debt default, underscoring how China’s slumping property market has hit its former real estate giant.
According to the filing on Wednesday, Country Garden said that if its financial performance continues to deteriorate, the group may not be able to meet its debt obligations, “which could lead to a default”. The developer also noted that “significant uncertainties” could cast “significant doubts about the group’s ability to continue as a going concern”.
Country Garden, once China’s largest developer by sales, is now mired in a debt spiral with potentially worse levels of debt than rival China Evergrande Group, which has four times as many real estate projects. China’s housing slump deepened as consumers held back spending and many companies remained unable to secure new financing to pay down debt and complete construction.
The housing slump added to broader concerns about the world’s second-largest economy, where authorities remain reluctant to introduce stronger stimulus to reverse a slowing economy. Signs of a contagious housing crisis have mounted in recent weeks, from a default on payments by one of China’s largest shadow banks to a debacle on the bonds of Hong Kong developers.
Country Garden said it would continue to negotiate with bond investors and banks for an extension to maintain operations. The company missed interest payments on some of its dollar-denominated bonds and faces a series of key dates in the coming weeks. Holders of yuan-denominated bonds are scheduled to vote this week on their plan to extend payments on bonds maturing on Sept. 4. The developer also faces the end of a grace period in early September to pay coupons on notes totaling $22.5 million.
Country Garden’s bonds are already trading in serious trouble, with $1 billion of notes due in January trading for less than 13 cents. The stock is now a bargain after a 67% plunge in Hong Kong this year.
The developer’s results reflected a sharp downturn in China’s real estate market. The Foshan-based company posted a net loss of 48.9 billion yuan ($6.72 billion) in the six months to June 30, compared with a profit of 612 million yuan a year earlier.The developer earlier this month warn The potential loss is as high as 55 billion yuan — the biggest loss since it listed in Hong Kong in 2007.
In the filing, Country Garden said that despite a 39 percent rise in revenue during the period, losses were exacerbated by lower property sales and prices, as well as higher impairment provisions for properties under development and financial and contract assets.
“With the dual tightening of sales and financing, the group’s liquidity is under unprecedented pressure,” the document said.
Country Garden admitted that it did not take timely measures to deal with the economic slowdown, nor did it recognize the risks of its heavy reliance and low-tier property market.
“Companies were still caught off guard by the depth and persistence of the market’s downtrend,” the firm said.
Other key figures in the results:
- Revenue increased by 39.4% year-on-year to 226.3 billion yuan
- Core net loss adjusted for items such as property revaluation was RMB 45.3 billion, while core net profit was RMB 4.9 billion
- As of December 31, total debt fell from 271.3 billion yuan to about 257.9 billion yuan. The total amount of debt maturing in the next 12 months is about 108 billion yuan.
- The cash balance shrank to 130.6 billion yuan, of which the restricted cash balance was 29.5 billion yuan
The company said in a statement that it will consider various debt management measures to resolve “phased liquidity pressure” in order to maintain stable operations and preserve value for investors. Meanwhile, Country Garden said it may be able to meet its financial obligations within the next 12 months, taking into account expected cash inflows, cost containment and other plans and measures including negotiations with creditors.
China’s real estate sector is already in a downturn worsened againand new home sales The July drop was the biggest in a year.The central government announced last week further easing Its mortgage policies are designed to stem a slowdown in the housing market.
The country’s largest lender is preparing to cut rates on existing mortgages and deposits to shore up economic growth, people familiar with the matter said. explain Tuesday.Economists say these measures could not enough to support growth.
Svlook
