Country Garden Secures Hong Kong Court Approval for Landmark Debt Restructuring, Easing China Property Crisis Pressure

Country Garden Secures Landmark Debt Restructuring Approval, Easing China Property Crisis

Country Garden, once recognized as China's largest homebuilder by sales, has achieved a critical breakthrough this week. The embattled developer successfully secured crucial approvals for its extensive onshore and offshore debt restructuring plans, providing a much-needed lifeline amidst the prolonged downturn in mainland China's property market.

Hong Kong Court Endorses Offshore Debt Extension

Sources confirmed that the Hong Kong High Court on Thursday officially sanctioned a proposal, allowing Country Garden to defer the repayment of approximately US$17.7 billion in offshore debt. This significant decision offers offshore creditors flexible options, including the ability to swap their debt for company shares, receive convertible bonds, or accept new notes issued by the developer.

Onshore Bondholders Agree to Extensions

In a parallel and equally vital development, Country Garden also announced an agreement with its onshore bondholders on Wednesday. Domestic creditors consented to extend nine bonds collectively valued at 13.8 billion yuan (approximately US$1.95 billion). These onshore creditors were presented with choices: selling their bonds back to the company at a discount, converting their debt into equity, or maintaining their claims as general creditors.

Significant Debt Reduction and Eased Pressure

Sourced information indicates that the combined impact of these two comprehensive restructuring initiatives is projected to be substantial for Country Garden. The company anticipates a reduction in its total debt by more than 90 billion yuan (equivalent to approximately US$12.7 billion). This significant deleveraging is expected to dramatically ease repayment pressure over the next five years, providing the developer with crucial financial breathing room. Furthermore, the financing costs for the majority of the newly structured debt instruments are forecast to decrease sharply, ranging between a competitive 1 percent and 2.5 percent.

A New Phase for Country Garden Amidst Property Slump

The approval of these strategic plans marks a new and hopeful phase for Country Garden, according to Liu Shui, director of corporate research at the China Index Academy, a prominent real estate research firm. Liu commented, “This could help to rapidly restore normal business operations,” underscoring the potential for these approvals to stabilize the developer’s finances and operational efficiency. This critical development unfolds as mainland China’s property market continues through its fifth year of a challenging slump.