Country Garden avoids bankruptcy after reaching debt deal with creditors

Country Garden avoids bankruptcy after reaching debt deal with creditors

Country Garden, one of China’s largest property developers, has averted a potential default after striking a deal with its creditors to extend the maturity of some of its bonds.

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A property built by Country Garden in Zhenjiang, China's Jiangsu province

The company, which has been struggling with a cash crunch amid China’s crackdown on the real estate sector, said on Thursday that it had reached an agreement with holders of $1.8 billion worth of bonds due in March and April to postpone the repayment until June.

The announcement came just hours before a court in Hong Kong was scheduled to hear a petition from a group of bondholders seeking to liquidate Country Garden, which could have triggered a cross-default on its other debts.

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Country Garden said the court hearing had been adjourned and the liquidation petition withdrawn as a result of the debt deal. It also said it had obtained waivers from its lenders to avoid breaching any covenants.

The company thanked its creditors for their “understanding and support” and vowed to “actively explore various financing channels” to improve its liquidity and repay its debts on time.

Country Garden is one of the many Chinese developers that have been hit hard by the government’s campaign to rein in the excessive borrowing and speculation in the property market, which accounts for a quarter of the country’s economy.

The most prominent casualty of the crackdown has been Evergrande, the world’s most indebted developer, which has been teetering on the brink of collapse since last year. Evergrande has also been trying to negotiate with its creditors to restructure its $300 billion debt pile, but has yet to reach a comprehensive deal.

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The turmoil in the real estate sector has raised fears of a spillover effect on the broader economy and the global financial system, as well as social unrest among millions of homebuyers and investors who have been affected by the crisis.

The Chinese authorities have been trying to contain the fallout by injecting liquidity into the banking system, easing monetary policy, and providing relief measures for homebuyers and small businesses. They have also urged developers to speed up the delivery of unfinished homes and protect the rights and interests of customers.

Source : CNN Business

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