China’s largest property developer Country Garden faces collapse, suffers web lack of 51.5 billion yuan in 6 months

China’s largest property developer, Country Garden, mentioned that it confronted a lack of USD 7.1 billion within the first six months of the yr, mounting strain on the Chinese homebuilder already experiencing a monetary meltdown, The New York Times (NYT) reported.

The losses suffered by Country Garden and the ensuing money crunch are the newest proof of the worsening disaster in China’s actual property market, the place years of extreme borrowing have left lots of the largest builders with mountains of debt they’ve been unable to pay again.

As China’s financial system has slowed lately, the already sluggish actual property market has come to a whole halt, placing Country Garden, which has a complete debt of over USD 187 billion, in peril.

Compared to a revenue of 1.9 billion yuan in the identical interval final yr, Country Garden’s web loss over the previous six months was 51.5 billion yuan. This month, it issued a warning that it anticipated posting a major loss, citing an “unprecedented difficult period” for China’s actual property market, as reported by The New York Times.

The firm mentioned that income elevated within the first half, nevertheless it appeared to acknowledge that it had discounted properties with the intention to keep gross sales volumes and a “smooth business operation.” The firm had reported that contracted gross sales in July decreased by 60% from a yr earlier.

Country Garden acknowledged in an announcement that it was caught off-guard by “the profundity and persistence of the market’s downtrend.” Additionally, it acknowledged that the corporate had made disproportionate investments in actual property in smaller areas the place the financial droop had been extra extreme.

“All these shortcomings have led to the most severe difficulty that the company has ever faced since its establishment,” Country Garden mentioned, in line with NYT.

The firm earlier on Wednesday mentioned that it could increase USD 34 million by issuing recent shares.

Country Garden mentioned it deliberate to situation 350.6 million shares at 77 Hong Kong cents apiece subsequent week. The proceeds would go to a subsidiary of Hong Kong-based Kingboard Holdings Limited, a supplies and chemical compounds producer with a property division to which Country Garden owes cash.

Country Garden mentioned it owed the Kingboard Holdings subsidiary round USD 200 million, to be paid in installments, with the ultimate cost due in December.

About 1.3% of Country Garden’s present shares are made up of recent shares. The shares are being provided at a 15% low cost to Tuesday’s closing worth. 67% of Country Garden’s shares have been misplaced this yr. A deal to promote a 27% stake in a business and residential actual property improvement in Guangzhou, southern China, for USD 177 million was introduced by Country Garden final week, NYT reported.

Previously lauded as a lucky survivor in China’s turbulent actual property market, Country Garden has been the most important vendor of houses within the nation for the previous six years. It had dodged the business’s liquidity downside, which developed when the federal government in 2020 restricted builders’ entry to credit score in an effort to cease an actual property growth.

Numerous actual property firms have defaulted within the final three years, together with Evergrande, the now-bankrupt developer that beforehand competed with Country Garden for dominance of the sector.

However, Country Garden is now the one making an attempt to keep away from collapse. This month, it did not make two curiosity funds to international bondholders. The firm should pay these bonds by the tip of the next week or it could be in default with its collectors. Additionally, it’s making an attempt to delay the reimbursement of a home bond price USD 350 million, which is due this subsequent week, till 2026, The New York Times reported.

(This information report is revealed from a syndicated feed. Except for the headline, the content material has not been written or edited by OpIndia employees)