China's Country Garden faces fresh debt payments, could announce restructuring soon

China's Country Garden may announce a restructuring plan for its offshore debt soon, local media reported on Monday, as the country's largest private property developer faced another looming debt deadline. The developer, which missed two dollar interest payments last month, has two coupons totalling $66.8 million coming due on Monday. Country Garden declined to comment on the report by media outlet Cailianshe and whether it has made any payments.

The coupons due on Monday are tied to Country Garden's 6.5 per cent April 2024 and 7.25 per cent April 2026 bonds. The payments have a 30-day grace period, but the developer faces a big test later this month when its entire offshore debt could be deemed in default if it fails to pay a $15 million September coupon by October 17.

China's largest private developer has $10.96 billion offshore bonds and 42.4 billion yuan ($5.81 billion) worth of loans not denominated in yuan. If it defaults, this debt will need to be restructured, and the company or its assets also risk liquidation by creditors.

China's property sector has been hit by a debt crisis since 2021. Companies accounting for 40 per cent of Chinese home sales - mostly private property developers - have defaulted on debt obligations, leaving many homes unfinished. More than two years on, the crisis has deepened as confidence in both housing and capital markets dried up, further squeezing developers' liquidity.

Beijing has rolled out a range of support measures in recent months to revive the sector, which makes up about a quarter of the world's second-largest economy. Some analysts, however, say more measures are needed. In a research note on Friday, UBS said property sales growth in major cities likely stayed weak in September, suggesting a limited rebound of sales despite more supportive measures to ease the property crisis.

China's average daily home sales based on floor area during the Golden Week holiday were down 17 per cent from a year ago, according to China Index Academy on Saturday. The market is closely watching whether Country Garden, which owns projects across the country mostly in smaller cities, can manage to dodge default again by making payments at the last minute.

In September, Country Garden won approval from its onshore creditors to extend yuan bond payments, and in the same month made coupon payments on the offshore markets in the last hours of the end of a grace period. But the developer has not yet paid a $15 million coupon due September 17 and another $40 million coupon due on Sept 27, both of which have 30-day grace periods.