Country Garden, a troubled real estate giant based in China, is taking measures to raise funds and avoid default as it battles a liquidity crisis. The company plans to issue 350 million shares to pay off loans owed to a creditor. However, no cash will be received from this transaction, as the stocks will be used to offset the money needed to repay Kingboard Holdings. The total value of the shares is estimated to be around $270 million.
In an attempt to reassure investors, Country Garden highlighted the normal operations of its $100 billion project in Malaysia, which is its largest overseas development. The company also emphasized that its operation in the region is safe and stable. These announcements, along with China’s recent policy measures to support the property sector, briefly boosted Country Garden’s shares in Hong Kong.
Country Garden’s financial difficulties have been a cause for concern, as a debt default by the company could have wider implications for China’s economy and may affect investor confidence. The company previously acknowledged that it was facing significant difficulties due to deteriorating sales and a challenging refinancing environment.
Investors are eagerly awaiting Country Garden’s first-half earnings report, which is expected to provide insights into the company’s cash flows and its plans to address its debt problem. The company recently extended the deadline for bondholders to vote on a payment extension plan for a 3.9 billion yuan bond.
It is crucial for Chinese authorities to stabilize the real estate sector, as it plays a crucial role in the country’s economic growth. Reports of Country Garden missing payments on two dollar bonds earlier this month sent shockwaves through the market. The company’s financial troubles prompted a sell-off in its securities, leading to a temporary suspension of trading for 11 of its onshore bonds.
Sources:
– Laura He, CNN
– Stock Exchange Filing by Country Garden
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