Country Garden Holdings, a Chinese property developer, is struggling to raise funds as its sales plummet. The company has issued a warning stating that it will not be able to meet its offshore payment obligations on time. This comes as no surprise considering the company’s uncertain asset disposals and tight liquidity position in the short- to medium-term.
Due to a decline in property sales and weak consumer confidence, China’s property sector has been under significant stress. Many developers, including China Evergrande Group and Sunac China Holdings, have faced defaults as a result. In fact, Evergrande’s recent cancellation of a debt restructuring plan could have a catastrophic effect on the sector.
In the first nine months of this year, Country Garden’s contracted property sales have fallen by approximately 44% compared to the previous year, amounting to 154.98 billion yuan (US$21.25 billion). As a result, the company’s available funds have been depleted, and it continues to face challenges in sales and financing. Given the current market conditions, generating cash through asset sales will be a difficult task.
To address these issues, Country Garden has enlisted the help of financial advisors from China International Capital and Houlihan Lokey. Their primary objective is to evaluate the company’s capital structure and liquidity and seek offshore liability management measures. The goal is to develop a fair and equitable solution that will lead to a sustainable capital structure.
It is evident that Country Garden Holdings is facing significant challenges amidst its cash shortage. With declining sales and limited options for raising funds, the company must take decisive measures to stabilize its financial position and ensure its long-term success.
