Long before rescue talks, Country Garden struggled to build homes, pay bills

investing.com:

BEIJING/HONG KONG (Reuters) — When China's largest developer Country Garden first skipped debt payments in August, its shares tumbled 14%, marking a reversal of fortunes: from industry poster child to another troubled property company struggling to pay its creditors.

The same month, Chinese authorities quietly started talks with Ping An asking the insurance group to take a controlling stake in the developer, according to a Reuters report that was denied by Ping An.

Interviews with contractors, workers and home buyers, as well as a review of lawsuits involving Country Garden, show that for months before its problems became public, the company was struggling to deliver homes and pay contractors on time.

Until the middle of this year, the company was seen by most investors and home buyers as a beacon of strength in a real estate sector grappling with ballooning debt, tighter regulations and slumping sales. It was one of the few developers able to issue state-guaranteed onshore bonds last year and get credit lines from banks in early 2023.

China, the world's second-largest economy, has struggled to recover from COVID shutdowns and issues with its giant property sector. Country Garden's woes highlight the challenge Beijing faces as it seeks to engineer a rescue plan for the company and improve conditions for the wider industry.

«Nobody believed that Country Garden would fail. One important reason is that it seemed to have the implicit guarantee from the state,» the Economist Intelligence Unit's Xu Tianchen told Reuters.

Observers believed Country Garden, which has liabilities of around $190 billion and more than 3,000 projects under development, was «good enough and big enough to escape a default or a collapse,» he added.

Ex