The embattled Chinese homebuilder Country Garden
Country Garden plans to raise $34 million through share issuance
On Wednesday, the embattled Chinese homebuilder Country Garden announced its plans to raise $34 million by issuing new shares. This move is aimed at managing the company’s debt problems and tackling the deepening property crisis that is negatively impacting China’s economy.
Country Garden disclosed in a filing with the Hong Kong Stock Exchange that it intends to issue 350.6 million shares at a price of 77 Hong Kong cents per share next Wednesday. However, the proceeds from this share issuance will not benefit the company directly. Instead, they will be allocated to a subsidiary of Hong Kong-based Kingboard Holdings Limited, a materials and chemicals manufacturer which also has a property division. Country Garden owes millions of dollars to this subsidiary.
In an attempt to entice investors, Country Garden is offering the shares at a 15 percent discount compared to Tuesday’s closing price. The company is currently on the verge of defaulting after missing two interest payments earlier this month. If it fails to repay offshore bondholders by next week, it will default on its debt obligations.
The financial turmoil faced by Country Garden is just one consequence of the ongoing real estate crisis in China.
Country Garden’s hefty liabilities and financial challenges
As of 2022, Country Garden’s liabilities stood at approximately $190 billion. Over the past few years, numerous Chinese property developers, including some of the industry’s major players, have defaulted due to excessive borrowing.
Although Country Garden had managed to avoid such a fate, a sharp decline in sales in recent months has exacerbated its financial woes. In addition to the missed interest payments, the company is currently negotiating with creditors to postpone the repayment of a Chinese bond, which is due later this week, until 2026.
Reports suggest that Country Garden still owes around $200 million to the Kingboard Holdings subsidiary. This amount is to be paid in installments, with the final payment expected in December. The issuance of new shares by Country Garden amounts to 1.27 percent of the company’s existing shares.
Later today, the company is set to release its financial results for the first six months of 2023. Earlier this month, Country Garden issued a warning stating that it anticipated a loss between $6.2 billion and $7.5 billion for that period. The company cited an “unprecedented difficult period” for China’s property industry as the reason for this anticipated loss. Throughout this year, shares in Country Garden have experienced a decline of 67 percent.