HONG KONG: China's Country Garden submitted the preliminary terms of an offshore debt restructuring proposal to some creditors late last month and lowered its cash flow projection, said sources, as the struggling property developer looks to avoid liquidation.
The company revised its cash flow projection in the proposal, said two sources who have direct knowledge of the plan and another person familiar with the matter. The projection is a standard part of a debt revamp process to show a firm's ability to repay.
The projection shows Country Garden expects a weaker cash flow in coming years compared with the estimates it had shared with some offshore creditors earlier this year, two of the sources said.
Details of the cash flow projection were not immediately known. The sources declined to be identified as they were not authorised to speak to the media.
After the publication of the Reuters story, a spokesperson for Country Garden said that the company had "recently submitted a preliminary draft" of a debt restructuring plan to major creditor groups.
"The company is having further negotiations with its banking group creditors and the ad hoc group of US dollar bondholders on the terms of the restructuring plan," the spokesperson said in a statement.
Country Garden said details of the plan cannot be disclosed due to confidentiality reasons, and added that it hoped to reach agreements with major creditor groups as soon as possible.
It did not comment on the revision of the cash flow outlook.
Once China's biggest developer, Country Garden defaulted on its $11 billion in offshore bonds late last year and is fighting a liquidation petition in Hong Kong. The next court hearing has been set for Jan 20, 2025.
Country Garden's downward revision of the cash flow outlook comes after the government rolled out a raft of measures over the past year to revive the property sector, which has slumped in recent years as developers succumbed to a mountain of debt.
China's new home prices fell the most year-on-year in October since 2015, while property investment declined 10.3% in the first 10 months of 2024, official data showed on Friday, suggesting the support measures have had little impact so far.
The finance ministry last week introduced new tax incentives to further lower the cost of home purchases and spur demand -- its latest support effort. China also cut benchmark lending rates by 25 basis points in October to try to boost demand.
RESTRUCTURING FRAMEWORK
At a hearing in July, Country Garden told the Hong Kong High Court that it expected to publish the term sheets for a revamp of its offshore debt to creditors in September and that it planned to seek approval from the court on that arrangement early next year. The company missed the September deadline.
If Country Garden can gain support from its key creditors for the restructuring proposal before the January court hearing, it would pave the way for the company to seek more time from the court to implement a restructuring plan.
PJT Partners, a financial adviser representing the main group of Country Garden's offshore bondholders for the debt restructuring talks, declined to comment.
Ever Credit Limited, a unit of Hong Kong-listed Kingboard Holdings, filed the liquidation petition against Country Garden in February for non-payment of a $205 million loan.
Country Garden and some of its offshore creditors have in recent weeks actively discussed a restructuring framework that covers potential haircuts that the bondholders will have to take and a debt-to-equity swap, according to one of the sources.
Its shares have been suspended from trading since April pending the release of 2023 full-year and 2024 interim results. In an exchange filing this month, Country Garden said contracted sales for October fell 31% to around 4.33 billion yuan ($598 million).
Many Chinese property developers have defaulted since the sector slipped into a debt crisis in mid-2021, resulting in millions of uncompleted homes across the country.
Some are facing liquidation lawsuits filed by creditors, with the latest being state-backed Sino-Ocean Group. Courts have ordered a handful, including sector giant China Evergrande Group, to be liquidated. - Reuters
