The hearing getting adjourned for liquidation gave a breather to the embattled Chinese developer which is trying to finalize an offshore debt revamp plan.

Country Garden liquidation hearing for debt

The hearing on Monday, July 29 is the latest in County Garden’s legal wrangling with creditors. This is after Ever Credit, a unit of laminates maker Kingboard Holdings, filed a winding-up petition against it in February.

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.

The developer defaulted on its $11 billion worth of offshore bonds last year.

The main purpose of a wind-up petition is to speed up the debt-restructuring process by forcing the defaulted company to come up with a repayment plan through negotiations with creditors. The builder said last month that work on its restructuring was continuing and that it had regularly addressed due diligence requests from bank creditors and a key group of bondholders.

Country Garden’s declining sales

Country Garden, once China’s largest developer by sales, continues to struggle amid a prolonged property crisis in the world’s second-largest economy. In June, Country Garden’s contracted sales plunged 73% to 4.3 billion yuan (S$797 million) from a year earlier, according to an exchange filing.

Country Garden grace period

After defaulting on U.S. dollar bonds last year, the distressed real estate giant in May made interest payments for two bonds within a grace period after missing an initial deadline earlier. The move averted a potential test of a Chinese programme to backstop distressed developers’ debt.

Country Garden has become one of the biggest casualties of China’s real estate crisis, with 1.4 trillion yuan of total liabilities, as per report. The Foshan-based developer suspended trade in its shares in the Hong Kong market in March after postponing the publication of its annual report.

Country Garden debt restructuring

A lawyer for Country Garden told the court on Monday that the developer expected to publish offshore debt restructuring term sheets in September, and that it planned to seek approval from the court on that arrangement early next year. 

The hearing into Country Garden’s liquidation petition comes against the backdrop of Chinese authorities stepping up efforts to revive the property sector after it slipped into an unprecedented debt crisis in mid-2021.

Real estate defaulters

Over the last couple of years, a growing list of developers have defaulted on their offshore debt repayment obligations. Many are facing liquidation lawsuits filed by creditors, with the latest being state-backed Sino-Ocean Group. A handful, including sector giant China Evergrande Group, have been ordered to be liquidated so far.

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