Chinese Developer Country Garden Seeks Grace Period Amid Looming Debt

Unfinished apartment buildings at the Phoenix City residential project, developed by Country Garden Holdings Co., in Shanghai, China, on Jan. 17, 2022. Qilai Shen/Bloomberg via Getty Images

Country Garden Holdings, China’s largest property developer, has reportedly sought a 40-day grace period to repay maturing bonds due on Sept. 2 as the company approaches the verge of default.

The embattled developer is also seeking its creditors’ approval to extend the repayment of 3.9 billion yuan (about $535 million) private onshore bond by three years, according to the document seen by Reuters.

Creditors are expected to vote on the new plan on Aug. 31. The company added a new voting item for an additional 40-day grace period in the document received by private bondholders on Aug. 29.

Country Garden was once known for its large-scale projects in smaller cities and rural areas, as well as its ambitious plans to build a forest city in Malaysia.

However, the company has been hit hard by Beijing’s tightening measures on the property sector, which aim to curb speculation and debt risks. The company has also faced increasing competition from other developers, such as Evergrande Group and Sunac China Holdings Ltd.

The developer earlier this month missed two dollar coupon payments totaling $22.5 million, fueling fears that the country’s property debt crisis could hamper a broader economic recovery and spill overseas.

Forest City Project in Malaysia

The debt crisis also raised questions about Country Garden’s ability to complete a $100 billion Forest City project, its largest overseas development in the southern Malaysian state of Johor bordering Singapore.

Country Garden said on Aug. 28 that the Forest City project is “operating normally” with strong sales performance, assuring that its overall operation in Malaysia remains “safe and stable” despite the debt crisis.

“Various debt management measures are considered to actively resolve the pressure of periodic liquidity to ensure the company’s long-term future development,” the developer told reporters.

Forest City is a joint venture between Country Garden (60 percent) and Esplanade Danga 88 (40 percent), a private Malaysian company backed by the Johor government and the Sultan of Johor, according to its website.

Malaysian Prime Minister Anwar Ibrahim said that his government would designate the project a “special financial zone,” lowering the cost of doing business there in an effort to boost the local economy.

The zone designation will include incentives like a flat income tax rate of 15 percent, multiple entry visas, and fast clearance for skilled workers commuting between Malaysia and Singapore.

“I am confident this will attract many companies that are experiencing high operating costs in Singapore,” Mr. Anwar said at a nationwide tour of the Budget 2024 on Aug. 28, according to The Star.

The project aims to house 700,000 people by 2035 in a development that includes office towers, malls, schools, and residential buildings.

Indrajit Basu and Reuters contributed to this report.