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Country Garden aims to have offshore debt restructuring plan by year end

ANN/THE STAR – China’s embattled Country Garden is aiming to pull together a tentative plan to restructure its offshore debt by the end of this year, two sources with direct knowledge of the matter said.

The nation’s biggest private property developer, which missed a coupon payment in October triggering default terms, then aims to start formal negotiations with offshore bondholders by February or March next year.

They added the firm expects to inform key bondholders of its cash flow projections by the year’s end, as part of the basis for the tentative restructuring plan.

The sources declined to be identified as the matter was confidential. Country Garden, which has almost USD11 billion of offshore bonds, declined to comment.

The timeline for the company’s debt restructuring plan has not been reported before.

Country Garden has been in the spotlight since August when its debt woes became public, rattling markets and forcing Beijing to roll out more support measures for the property sector.

A worker stands at a construction site of property developer Country Garden in Beijing, China. PHOTO: THE STAR

It has joined a long list of Chinese property developers that are either working on debt restructuring proposals or have presented them to creditors after having defaulted on offshore debt over the past two years.

Media reported this week that Chinese authorities have asked domestic financial behemoth Ping An Insurance Group to take a controlling stake in Country Garden. That report was denied by Ping An.

A state-engineered rescue of Country Garden would be one of the most significant interventions to date by authorities to support the cash-squeezed and highly indebted property sector, which accounts for a quarter of China’s economy.

The two sources, who have no information on the bailout talks, said some bondholders do not expect a higher recovery rate on their investments even if such a deal were to eventuate.

Offshore bondholders sought urgent talks with Country Garden after it did not pay the USD15 million coupon on October 18 – the end of a 30-day grace period, sources with direct knowledge of the matter have said.

CreditSights said in a November 2 research note that Country Garden had “formally defaulted” on its offshore bonds due to the missed payment.

The company has been privately communicating with some bondholders about its efforts to formulate a debt repayment plan since then, the sources said.