Chinese Property Developer Country Garden Expects Loss, Seeks Government Support
China’s largest property developer, Country Garden Holdings, has estimated that it will report a loss for the first half of this year and is seeking guidance and support from the government. The company cited a decrease in gross profit margin for its real estate business and an increase in provision for impairment in property projects as the main reasons for the anticipated loss. This announcement follows HSBC analysts downgrading their recommendation on the company’s bonds last month. Country Garden has significant bond maturities later this year and is actively considering measures to ensure cash flow security.
The anticipated loss comes despite the signing of a dual tranche loan deal last month. Country Garden expects to record an unaudited net loss, compared to a net profit of approximately 1,910 million yuan during the same period last year. The company acknowledged that the downward trend in real estate industry sales has impacted its performance.
As the debt-stricken developer faces challenges, it is actively seeking government support. The company submitted a filing to the Hong Kong stock exchange expressing its need for guidance and support from the government. This appeal may arise from the pressure on the developer’s bond prices, which remain under significant strain.
HSBC analysts downgraded their recommendation on Country Garden’s bonds, highlighting the peak offshore debt repayment in December 2023 and January 2024. To fulfill these repayments, the company would require a total of US$2 billion. The peak onshore bond maturities are due in September 2023, with slightly over US$1 billion-equivalent requiring repayment.
Country Garden reassured investors by stating that it is actively considering various countermeasures to secure its cash flow. These measures may include reducing operating expenses, expediting loan collection arrangements, expanding financing channels, and managing and optimizing debt repayment arrangements. The company is committed to addressing its financial challenges and ensuring its stability.
Despite these efforts, analysts had already begun downgrading their views on the company before the announcement. Country Garden is 53 percent controlled by Yang Huiyan, a prominent Chinese businesswoman.
In conclusion, Country Garden Holdings, China’s largest property developer, is expecting a loss for the first half of the year due to a decrease in gross profit margin and an increase in provisions for impairment in property projects. The company seeks government support to navigate its challenging financial situation. It is actively considering various measures to secure its cash flow and address its debt obligations, including reducing expenses and expanding financing channels. Analyzing the situation, HSBC analysts had already downgraded their recommendation on the company’s bonds, intensifying the pressure on the developer. The company is determined to resolve its financial issues and ensure stability in the face of ongoing challenges in the real estate industry.
