Country Garden default speculation rumbles as offshore debt deadline nears

With no word of payment, a deadline for paying a $15 million coupon from Country Garden has passed, raising speculation that China's largest private property developer has fallen behind on its offshore contracts.

As is customary in bond contracts, nonpayment would result in cross-defaults on other Country Garden obligations. A default on the company's over $11 billion worth of offshore debts would trigger one of the largest corporate debt restructurings in China.

Regarding sensitive information, one of the tranche's bondholders, who wished to remain anonymous, claimed he had not received payment on the coupon because the 30-day grace period had expired.

On Wednesday, Country Garden restated its expectation that it wouldn't be able to pay off all of its offshore debt and expressed hope for a "holistic" approach to solving its problems.

The company representatives refrained from commenting, and their statement did not specifically address the question of whether a default had occurred.

Analyst Cedric Rimaud of the independent corporate bond research firm GimmeCredit commented on Country Garden's late payment and warned that there will be a default if they don't make the payment within the grace period.

Since the government took action in 2021 to control the industry's excessively high debt levels, a large number of other Chinese real estate developers have fallen behind, struggling with cash flow issues.

Since the sector makes up one-fourth of China's GDP, the country's ongoing problems have affected the second-biggest economy in the world and frequently rattled international financial markets.

After China Evergrande, a troubled peer company that has also defaulted and is at the core of the industry's debt crisis, had its chairman investigated, Country Garden missed its payment.