Country Garden is raising money to avoid default as the troubled real estate giant fights a liquidity crisis that some fear could spread to China’s larger economy and even spill over abroad.
The Hong Kong-based laminate manufacturer Kingboard Holdings will receive new shares worth 270 million Hong Kong dollars ($34 point 4 million) from the Foshan, Guangdong-based company in place of a loan that was past due.
The announcement was made on the same day that Guangzhou, a major Chinese city, loosened mortgage requirements for homebuyers in an effort to support the struggling real estate market.
The action by Country Garden represents a renewed effort by the real estate company, which was the largest residential property developer in China last year, to avoid default as it struggles to raise money and reassure its investors.
The company stated that its $100 billion project in Malaysia, which is its largest overseas development, was “operating normally” and that its operation in the area was “safe and stable” on Monday. Country Garden’s shares in Hong Kong briefly increased following the announcement and China’s most recent sector-supportive policies.
The company, however, is under pressure as the stock is still down 67% for the year.
Liabilities owed by Country Garden total close to $200 billion. With about 31 billion yuan ($4 point 3 billion) in bonds due to mature through the end of 2024, it is under increasing pressure to pay off its debts.
The market was shocked earlier this month when news broke that the company had failed to make payments on two bonds with dollar denominations. The company also extended the voting deadline for bondholders’ approval of a plan to postpone payments on a 3.9 billion yuan ($530 million) bond from August 25 to August 31 last week.
Later on Wednesday, the company is expected to announce its first-half earnings. Investors will closely monitor the report for information on how it may deal with its cash crunch.
Source-CNN
