China's Biggest Homebuilder Raises Capital in Scramble to Pay Debts
The Chinese real estate company, Country Garden, is in danger of defaulting on its $190 billion debt. This is a sign of the company's rapidly spreading real estate crisis.
Country Garden, the embattled Chinese housebuilder, announced on Wednesday that it would raise $34million by issuing shares. This is its latest attempt to control its debt and a growing property crisis that has been weighing down on China's economic growth.
Country Garden filed a document with the Hong Kong Stock Exchange stating that it would be issuing 350.6 million shares at 77 Hong Kong Cents each on next Wednesday. The proceeds won't go to the company. The proceeds will instead go to a Hong Kong-based subsidiary of Kingboard Holdings Limited. This materials and chemicals manufacturer has a property division that Country Garden owes Millions of Dollars to.
Country Garden, China’s largest property developer, has discounted its shares by 15 percent from Tuesday’s closing price. It is on the edge of collapse.
Brink of default
After missing two interest payments in the beginning of this month. The company must repay offshore bondholders by next week or else it will default on its creditors.
Country Garden's financial troubles are the latest fallout of a real estate crisis that is rapidly spreading in China.
Country Garden's liabilities were estimated to be $190 billion by 2022. In the past few years, a number of Chinese property developers have failed under the burden of debt accumulated over many years of excessive borrowing.
Country Garden avoided that fate but the sharp decline in sales, which began a few months back, exacerbated their financial troubles. The company has also missed out on interest payments and is currently negotiating with its creditors to defer the repayment of a Chinese Bond, which was due this week.
It still owes the Kingboard Holdings subordinate around $200 million. The payment will be made in installments with the final payment expected in December. Country Garden's new shares represent 1.27 per cent of the existing company shares.
The company will announce its results for the first half of 2023 on Wednesday. It warned earlier in the month that it was expecting to suffer a loss between $6.2 billion - $7.5 billion during those six months. The company cited an 'unprecedented period of difficulty' for China's real estate industry.
The company's shares have dropped 67 percent in this year.