China’s battered property sector faces another major test today as one of its struggling companies, Country Garden, has to stump up US$15 million in interest on an offshore bond.
Residential property developer Country Gardens almost missed two payments earlier this month and if it misses this payment will have 30 days to find the money before being declared in default.
According to Reuters, the payment had not been made by late Monday afternoon Hong Kong time.
Country Garden, which has focused on developments in second and third-tier regional cities in China, has around US$14.9 billion of debt maturing this year alone or slightly more than its cash holdings.
Analysts expect it to call for its debts to be restructured to allow it time to strengthen its balance sheet.
Last week, domestic-based bondholders agreed to a three-year extension of repayments on seven of its bonds.
Country Garden's bond crunch follows a new development at Evergrande, another group reeling from China’s property downturn, where several employees at a subsidiary in the southern city of Shenzhen were arrested over the weekend, sending its shares plummeting by another 25%.
Evergrande, the world’s most indebted property developer with liabilities of $340 billion, said earlier this month that it had delayed creditors’ meetings from September to October.
China has tried to prop up its property sector, which accounts for roughly a quarter of its economy, by cutting mortgage rates and through direct support to troubled companies such as trust company Zhongrong, which has sizeable real estate exposure.
A new state-owned insurance company, Hai Gang Life, has also been established to take on Evergrande’s insurance arm.