Country Garden, the biggest builder in the Chinese property market, has failed for the first time to pay $15.4 million interest on its dollar bonds.
Chinese property developer Country Garden has failed to pay interest on a $500 million (€472 million) note due in 2025, in the latest sign of distress in the Chinese property industry.
The deadline, including a 30-day grace period after missing the initial deadline 17 September, to pay the $15.4 million interest passed last week. Therefore, the event “constitutes an event of default,” according to a notice to holders from trustee Citicorp International seen by Bloomberg News.
The company warned its creditors earlier this month that it would not be able to repay a separate HK$470 million (€57 million) loan, explaining that its sales were under “remarkable pressure”.
Country Garden's shares have lost more than two-thirds of their value this year.
The nervousness around the company raised rumours that its founder and chairman had both left China, but these claims were rejected in a company statement at the end of last week.
The builder, among the world’s most indebted developers, is now likely facing one of the nation’s biggest-ever restructurings, according to Bloomberg.
Following the default and restructuring of China's Evergrande, the world's most heavily indebted property firm, Country Garden's shaky finances are the latest blow to the Chinese property market which, along with related industries, accounts for about 20% of gross domestic product of the world's second-largest economy.
Following Citicorp's note, the Credit Derivatives Determinations Committees will meet to discuss if a failure-to-pay credit event occurred. If this is the case, it opens the door to having the so-called credit default swap contracts come into effect, which are used by traders to hedge against non-payment by a government or company in case of a default.