Some offshore creditors of Country Garden consider forming group for debt revamp talks

Some offshore creditors of embattled Chinese developer Country Garden are in talks with a New York-based law firm and are considering options including legal ones, by forming a group if the company seeks to restructure its debt, a representative for the law firm said.

While Country Garden is one of the few leading private developers in China that has not defaulted on its offshore debt obligation yet, its liquidity stress became public earlier this month after it missed two dollar coupon payments.

Offshore creditors are closely watching to see if Country Garden would be able to meet the grace period for the two missed bond coupon payments, which ends on Sept 5, John Han, a Hong Kong-based attorney at Kobre & Kim LLP, said on Wednesday.

The missed debt payments worth a total of US$22.5 million (RM104.40 million) by China's largest developer by sales value until this year raised fears that the country's deepening property debt crisis will spillover to its financial sector, heaping more pressure on the sputtering economy.

Kobre hosted a call with some of Country Garden's offshore creditors on Tuesday night, during which the law firm laid out Country Garden's primary business units, core assets which include its onshore and offshore property projects.

"We're in discussions with offshore creditors about potentially forming a group and options in case they're ignored by the company, or they hold discussions that are not productive," Han told Reuters.

Country Garden had total liabilities of 1.4 trillion yuan (US$194 billion, RM900.16 billion) at the end of 2022, while Kobre said its offshore bond debt is three times its onshore bond debt.

The developer has not made any public comments about its engagement with offshore creditors since missing coupon payments.

A spokesman for Country Garden on Wednesday declined to comment when asked by Reuters about the possibility of some offshore bondholders forming a group for debt restructuring talks.

Han said they had been in discussions with creditors interested in forming a group and weighing options, including some specialized in distressed credit and experienced in using strategies to improve value in debt restructuring cases.

He also said the number of creditors interested in joining the group grew "considerably" after Tuesday's call.

Country Garden has been talking with its onshore creditors to extend a 3.9 billion yuan private bond due Saturday. Creditors will have until Thursday to approve a proposal to extend the full repayment by three years.

All eyes are on Country Garden's first-half results, due to be disclosed on Wednesday, as it is set to report a US$7.5 billion loss.

Some offshore Country Garden bondholders separately told Reuters they expect the developer to prioritize negotiations with onshore creditors, and they were concerned whether their interests could be addressed in a timely manner by the firm.

Country Garden's shares fell another 3.3% on Wednesday, taking its losses in the last month alone to more than 40%.