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Chinese property developer Country Garden made a payment on its two-dollar bond on Tuesday during a grace period, ending a month-long saga that has become a focus of global investor concerns about China’s struggling real estate sector.
The company’s Hong Kong-listed shares retreated to 3 percent in early trade after local media reported that it had paid a total of $22.5 million in overdue coupons on two international bonds worth $500 million .
A person close to the company and a bondholder told the FT that Country Garden had made the payment but missed the initial deadline in early August. Country Garden declined to comment.
The payments meant the cash-strapped developer narrowly avoided a technical default, but traders said it would not change the prevailing and worsening financial stress in China’s large and economically important property sector.
Country Garden’s default on payments last month has raised concerns about a company once considered one of China’s safest and most financially healthy developers. Despite its recent gains, its shares are down more than 60% so far this year.
The developer has struggled in recent weeks to avoid dollar bond payments and a default on debt to domestic creditors.
On Friday, the company won approval from creditors to extend payments on nearly 4 billion yuan ($550 million) of bonds due to mature on Saturday, allowing the developer to repay the debt in installments over three years. One Country Garden public bondholder said it may begin similar extension talks with bondholders on publicly traded bonds.
Country Garden’s coupon payment comes at a time when Beijing is seeking to combat a downturn in China’s real estate sector, which typically accounts for about a quarter of annual economic activity.
After years of cracking down on overleveraging in the industry, Chinese authorities accelerated the pace of loosening mortgage rules this month. Last week, major cities such as Beijing and Shanghai lowered minimum mortgage rates for first-time buyers.
However, there are few signs that the liquidity crisis in China’s real estate sector is improving significantly. Policymakers in Beijing have so far remained reluctant to implement the massive policy easing that many analysts believe is needed to lay the groundwork for a slump in home sales.
Developers still face $38 billion in US dollar and yuan bond payments by the end of the year, with Country Garden alone having liabilities of around 136 million yuan as of end-June.
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