© Reuters. FILE PHOTO: Residential buildings are seen at Forest City in Johor, Malaysia, August 20, 2018. Picture taken August 20, 2018. REUTERS/Fathin Ungku/File Photo
By Xie Yu
HONG KONG (Reuters) – Embattled Chinese property developer Country Garden faces yet another liquidity test with Monday’s deadline to pay $15 million in interest linked to an offshore bond, after having dodged default at the last minute twice this month.
Country Garden, whose financial woes have worsened the property sector outlook and spurred a raft of support measures from Beijing, will have a 30-day grace period to pay the coupon before it is considered in default.
The $500-million, 6.15% bond matures in Sept. 2025. The coupon payment had not been received by late afternoon on Monday, said one holder of the bond tranche, who sought anonymity as they were not authorised to speak to media.
If Country Garden fails to pay the coupon before the grace period ends in mid-October, the principal will become due and any failure to service will trigger cross-default terms, said Sandra Chow, co-head of Asia-Pacific research at CreditSights.
“It’s going to be really hard,” for Country Garden to meet debt obligations due to its tumbling cash levels at a time when property sales in the world’s second-largest economy remained very weak, Chow said.
A Country Garden spokesperson did not respond to a Reuters request for comment about its latest debt repayment obligation.
Shares in Country Garden, one of the few large Chinese developers that have not defaulted on debt obligations, ended down nearly 2%, outstripping a fall of 1.4% in the benchmark index.
Last month, the company warned of default risks if its financial performance continued to deteriorate. It has debt of 108.7 billion yuan ($14.9 billion) due within 12 months but only about 101 billion yuan in cash as of June.
It avoided default by securing creditors’ approval to extend payments for an onshore private bond, a major relief for the embattled Chinese developer as well as the crisis-hit property sector.
In August the developer missed coupon payments of $22.5 million tied to two dollar bonds but managed to wire funds before a grace period ended this month, dodging a default.
Last week, onshore bondholders approved three-year extension of repayments on seven other Country Garden bonds.
Many creditors believe Country Garden will have to restructure its offshore debt if it does not get liquidity support soon.