Time’s Up For Country Garden: The Developer Just Missed A Major Deadline

Time’s Up For Country Garden: The Developer Just Missed A Major Deadline
Stéphane Renevier, CFA

about 2 months ago2 mins

What’s going on here?

Country Garden failed to pay interest on its US dollar bonds before the given deadline, making it the latest victim of China's languishing property sector.

What does this mean?

Country Garden was China’s biggest property developer by sales until recently. But this is not the firm’s shining moment, having just missed a $15 million coupon payment on a key bond. That almost guarantees an imminent default, forcing China into one of its most significant corporate debt restructurings since it dealt with infamous developer Evergrande. But unlike Evergrande, Country Garden was thought to have strong financial underpinnings before this default. In fact, it was one of only a few high-profile developers to tick the box on three debt-based criteria set back in 2021. Evergrande, meanwhile, failed all three. Country Garden’s default, then, could be a worrying sign that the property market’s cracks are deepening.

China property stocks fall

Why should I care?

For you: The center of our universe.

China’s embattled property sector serves as a stark reminder that the real estate market is volatile. House prices can fall unexpectedly, excess debt can backfire massively, and government interference can help or hinder. And remember, the housing market underpins many economies: houses are most folks’ biggest asset, so property prices play a major role in consumer confidence and, as a result, spending on household goods like gadgets and furniture. Plus, major construction companies only thrive when the market’s in a good spot.

The bigger picture: Bonds have problems too.

Bonds have a reputation for being a less volatile option than stocks, but even they come with plenty of risk. Country Garden’s dollar bonds, for example, have fallen from $0.70 at the start of the year to a mere $0.06 now. And sure, bondholders could pick up some spare change when the company’s debt is restructured, but there will be plenty of obstacles and losses along the way.

Country Garden dollar bonds


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