Analysis - Country Garden faces heat from liquidation suit to get cracking on debt revamp talks
investing.comBy Marc Jones, Xie Yu and Scott Murdoch
LONDON/HONG KONG (Reuters) — A liquidation petition filed against China's Country Garden will ramp up pressure on the embattled developer to come to the negotiating table for debt restructuring talks, some of its offshore creditors, advisers, and analysts said.
The liquidation order against peer China Evergrande (HK:3333) in January will also inject urgency into Country Garden to start formal discussions with creditors, they said.
Country Garden said on Wednesday a liquidation petition had been filed against it in a Hong Kong court for non-payment of a $205 million loan by a creditor, Ever Credit Limited, a unit of Hong Kong-listed Kingboard Holdings. The court hearing has been set for May 17.
«These winding up petitions are often used as a tactic (by the bondholders and their advisers) to get the chairman back to the negotiating table,» said Omotunde Lawal, head of emerging markets corporate debt at Barings in London.
She added that «no one wants to go through the winding up process» because it has knock-on effects for the property developers' onshore businesses and causes everything «to grind to a halt».
Foshan, Guangdong-based Country Garden, China's biggest private property company by sales, got entangled in the country's spiralling real estate liquidity crisis that began in 2021. The developer's $11 billion worth of offshore bonds is now deemed to be in default. Its total liabilities are close to $200 billion.
China's property sector, which accounts for a quarter of the world's second-largest economy, has lurched from one crisis to another since 2021 after a regulatory crackdown on debt-fuelled construction triggered a liquidity squeeze.
A string of developers have defaulted
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