Investors are being kept in the dark about the precise day the grace period expires by Country Garden Holdings Co., the troubled Chinese developer that Country Garden Leaves Investors earlier this month failed to make interest payments on some dollar bonds.
The nation’s offshore junk debt market, which has lost $87 billion in the last two years, is showing more signs of opaqueness as a result.
Investors are being kept in the dark about the precise day the grace period expires by Country Garden Holdings Co, the troubled Chinese developer that earlier this month skipped interest payments on some dollar bonds.
Country Garden Leaves Investors
The nation’s offshore junk debt market, which has lost US$87 billion (RM404.9 billion) over the past two years, is showing additional indications of obscurity as a result.
Country Garden, one of China’s largest developers, is require to pay back a total of $22.5 million in two coupons during the grace period; otherwise, creditors may declare a default.
The developer’s first on this type of debt. Given that Country Garden has four times as many projects as its defaulted. Rival China Evergrande Group, that could threaten an even bigger impact.
But, it’s unclear if the grace period expires on September 5 or September 6. Which increases the possibility of legal disputes if payment falls between those dates.
The ambiguity results from different interpretations of the offering memorandum’s standard language. Delinquency “in the payment of interest that persists for 30 days” is describe in the document as a “event of default.”
That makes sense. Yet, the fact that August 6 was a Sunday.
That August 7 was the next business day renders the Country Garden Leaves Investors situation ambiguous. Should the 30-day grace period begin on August 6 or August 7? The document is silent on this. Country Garden chose not to respond.
Many developers, including Evergrande, have started using grace periods. In recent years as a result of China’s escalating real estate debt crisis.
Often, doing so merely served to buy them some more time until they eventually went into default, adding to the record number of debt failures.
Country Garden Leaves Investors
Chinese junk dollar bonds have fallen below 65 cents due to growing worries that Country Garden. Which had 1.4 trillion yuan (RM910 billion) in total obligations at the end of last year, would suffer the same fate.
The market value of Bloomberg’s index for the instruments, which are primarily issue by builder. Has decreased from approximately US$131.8 billion two years ago to only about US$44.7 billion today.
It is difficult to estimate recovery and determine fair value because Country Garden or other relevant parties. Have not provided any clarifications regarding the builder’s missed interest payments or, more broadly.
Its debt intentions, according to Zerlina Zeng.
Senior credit analyst at CreditSights. This most likely Country Garden Leaves Investors also plays a role in the low trading liquidity of these troubled, high-yield Chinese property bonds.
The date for the end of the grace period has lately been reference in notes by a number of analysts at large international institutions. Emphasizing the lack of consensus, as either September 5 or September 6.
When questioned about the issue, Moody’s Investors Service responded. “We feel we should take the scheduled payment date as day 0.
But we are not confident given it was Sunday.” Early this month, the rating agency further downgraded Country Garden, placing it at Caa1.
Citicorp International Ltd., the bond’s trustee, also declined to comment.
Of course, if the developer ends up failing to pay the interest. The uncertainty surrounding the end of the grace period would give way to more pressing issues.
If the company follows other builders’ lead and undergoes a restructuring. Creditors would then concentrate on how much they might ultimately recover through that process.
Yang Huiyan, one of the wealthiest women in China, is the CEO of Country Garden. Which hasn’t publicly addressed its missed dollar note interest payments. If it intends to make up for them before the grace period expires in public.
Earlier this month, the builder issued a broader apology and promised to take stronger. More effective steps to secure home delivery and alleviate recurring liquidity issues.
The coupon payments in dispute are $10.5 million in interest. On a 2026-expiring dollar bond and $12 million on a 2030-expiring note.