Country Garden Holdings posted a first-half loss attributable to shareholders of RMB 48.9 billion ($6.7 billion), reversing a RMB 612 million revenue recorded a 12 months earlier, because the embattled Chinese developer acknowledged for the primary time that “material uncertainties” threaten its means to proceed as a going concern.
Country Garden’s income in the six-month interval rose 39 p.c year-on-year to RMB 226.3 billion, however deliveries of lower-margin properties and the availability for write-downs of tasks positioned nice pressure on income, the Foshan-based homebuilder stated late Wednesday in a submitting with the Hong Kong inventory trade.
The firm confirmed that it had didn’t undertake well timed measures as China’s property market underwent upheaval and had not grasped the dangers related to its disproportionately massive funding in third-, fourth- and lower-tier cities.
“All these shortcomings have led to the most severe difficulty that the company has ever faced since its establishment,” Country Garden stated. “The company felt deeply remorseful for the unsatisfactory performance. However, while reflecting on its faults, the company should not lose sight of the path ahead.”
Cash Burn
Country Garden’s internet write-down of under-development and accomplished properties held on the market ballooned to RMB 40.3 billion in the January-June interval — almost eight occasions the year-earlier degree. The firm reported unrestricted money and equivalents of RMB 101.1 billion, down from RMB 128.3 billion on the finish of final 12 months.
The money steadiness ought to cowl Country Garden’s RMB 69.5 billion in borrowings due inside a 12 months, stated Morningstar analyst Jeff Zhang. But he cautioned that current occasions counsel the corporate’s obtainable money could also be insufficient for making principal and curiosity funds.
“Moreover, we foresee that subdued homebuyers’ confidence in CGH will be the main overhang on sales in the future, further affecting the firm’s ongoing cash flow,” Zhang stated.
The developer chaired by Yang Huiyan revealed on 16 August that “significant uncertainties” existed relating to the settlement of onshore bonds with an issued quantity in extra of RMB 14.6 billion ($2 billion).
The lion’s share of the debt is from a Shanghai-listed RMB 5.83 billion bond with a remaining steadiness of greater than RMB 3.9 billion that comes due on 2 September. Bloomberg reported Tuesday that Country Garden has proposed a grace interval of 40 calendar days for the maturing bond because it seeks to win creditor assist to stretch fee into 2026.
Elevated Default Risk
Country Garden already missed $22.5 million in curiosity funds on a pair of offshore bonds in early August. There is a 30-day grace interval for these obligations, however the developer has $397 million in offshore bonds maturing this 12 months, plus $1 billion in USD notes due on 27 January.
“Given the continuing absence of USD-denominated bond interest payment, we believe CGH’s default risk remains elevated, barring substantial credit extension or financial support,” stated Morningstar’s Zhang, who foresees damaging earnings for the corporate via 2024.
In a bid to alleviate what it phrases “phased liquidity pressure”, Country Garden has sought to lift money via numerous asset gross sales. On Wednesday, the corporate introduced an settlement to promote HK$270 million ($34.4 million) in new shares to Kingboard Holdings in order to make a mortgage fee to the Hong Kong-based laminates maker and property investor.
The shotgun share sale to Kingboard adopted final Friday’s information that Country Garden would promote its 26.67 p.c stake in a Guangzhou three way partnership to its JV companion, state-backed China Overseas Land & Investment, for RMB 1.29 billion ($180 million).
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