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China’s property crisis reaches biggest builder Country Garden

THE STRAITS TIMES – The crisis engulfing China’s property sector is impacting its biggest developer, with Country Garden Holdings’ shares and bonds hammered amid fears that a reportedly failed fund-raising effort may be a harbinger of waning confidence.

Country Garden is one of the few remaining large, better-quality private developers that had been largely unscathed by the liquidity crunch, even as peers such as Shimao Group Holdings saw dramatic reversals in their credit ratings. The firm is viewed as a bellwether for contagion risk, as unprecedented levels of stress in the offshore credit market threaten to drag good credits down with bad.

Since taking the top spot from China Evergrande Group in 2017, Country Garden has remained the nation’s largest developer in China by contracted sales.

It employs more than 200,000 people. Headquartered in the southern city of Foshan in Guangdong province, the firm – like China Evergrande Group – has focused in recent years on building housing developments in lower-tier cities.

It has relied heavily on access to funding in the offshore credit market, like many peers that binged on debt to fuel growth. It has the largest pool of outstanding dollar bonds among China’s biggest property firms, excluding defaulters, with some USD11.7 billion outstanding, Bloomberg-compiled data shows.

Founding chairman Yeung Kwok Keung transferred his controlling stake to his daughter Yang Huiyan in 2005. She is now the firm’s vice-chairman and is the richest woman in China, according to a Bloomberg Billionaire Index.

Some of Country Garden’s dollar notes plunged to record lows in the wake of a report that the firm failed to win sufficient investor support for a possible convertible bond deal. Longer-dated bonds were trading as low as USD0.69 on the dollar as at late on Friday.

The developer has been relatively resilient in the face of the liquidity crisis sparked by a government crackdown on excessive borrowing by builders and housing market speculation, and was unscathed by the crisis at Evergrande.

Country Garden has been relatively resilient in the face of the liquidity crisis. PHOTO: THE STRAITS TIMES
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