Country Garden's Offshore Debt Restructuring Proposal

By Xie Yu and Clare Jim

HONG KONG (Reuters) – Country Garden (HK:2007) submitted the preliminary terms of its offshore debt restructuring proposal to some creditors late last month, as the indebted Chinese property developer tries to avoid liquidation.

The restructuring proposal includes a revised cash flow projection, which is standard in a debt restructuring process to demonstrate the firm's ability to meet obligations.

This projection indicates that the developer expects weaker cash flow in the coming years compared to earlier estimates shared with some offshore creditors. Details of the cash flow projection are currently unknown.

Sources who spoke to Reuters requested anonymity due to lack of media authorization. A spokesperson for Country Garden did not respond immediately.

Once China’s biggest developer, Country Garden defaulted on $11 billion in offshore bonds last year and is contesting a liquidation petition in Hong Kong, with the next court hearing scheduled for January 20, 2025.

The revised cash flow outlook occurs amid government efforts to revive the ailing property sector, which has struggled under heavy debt. Recent data reveals China’s new home prices fell the most year-on-year since 2015, and property investment declined by 10.3% in the first 10 months of 2024, indicating limited impact from these support measures so far.

Last week, the finance ministry introduced new tax incentives aimed at lowering home purchase costs and stimulating demand, while also cutting benchmark lending rates by 25 basis points in October.

During a July hearing, Country Garden informed the Hong Kong High Court of plans to publish term sheets for a revamp of its offshore debt in September and to seek court approval for that arrangement early next year. The company missed this September deadline.

Should Country Garden secure support from key creditors for the restructuring proposal before the January court hearing, it could facilitate a request for more time to implement the plan.

PJT Partners (NYSE:PJT), a financial adviser for the main group of Country Garden's offshore bondholders, did not immediately respond to requests for comment.