Country Garden share price surges 19% on debt deal with creditors, Hong Kong property index up 9%

livemint.com:

real estate player sought approval from its creditors to extend the maturity on a 3.9 billion yuan ($540 million) onshore private bond in a vote that ended on Friday night. The extension means the developer can repay the debt in instalments over three years, instead of meeting its obligations by Saturday. The bond is not publicly traded," the Reuters reports added.

This debt payment extension to Country Garden gives the company more time to avoid defaulting on its debt which, as per experts, is positive news for both financial markets and the Chinese government. The development gave a sentimental boost to other real estate stocks too. Hong Kong's Hang Seng Mainland Properties Index rose more than 9 per cent.

China’s real estate sector is witnessing an unprecedented liquidity crisis, posing a major risk to the Chinese economy which is struggling after the Covid-19 pandemic. The Chinese government has introduced various measures to support the property sector. “Since the sector's debt crisis unfolded in mid-2021, companies accounting for 40 per cent of Chinese home sales have defaulted, most of them private property developers," according to Reuters.

The debt crisis at Country Garden has raised concerns of fresh contagion just two years after China Evergrande Group defaulted. Meanwhile, China’s real estate giant Evergrande Group filed for bankruptcy protection in the United States in August. The company has sought protection under Chapter 15 of the US bankruptcy code, a measure that protects non-US companies undergoing restructurings from creditors that hope to sue them or tie up assets in the United States.