Chinese developer Country Garden reports $6.7 bn loss
Source: AFP
Embattled Chinese developer Country Garden reported a 48.9 billion yuan ($6.7 billion) loss for the first half of the year in a stock exchange filing Wednesday, adding to worries of a potentially catastrophic default.
One of China's biggest builders, Country Garden has racked up debts of more than $150 billion and said this month it had failed to make interest payments on two loans.
The group warned Wednesday that if its financial performance "continues to deteriorate" it faces possible default.
If Country Garden does not meet a deadline for a bond payment at the beginning of September, it could become the biggest Chinese real estate firm to crash since rival Evergrande in 2021.
The company's cashflow problems have fuelled fears that it could spread turbulence through China's economy and financial system.
The rise of the world's second-largest economy has been largely founded on property and construction, which account for about a quarter of China's GDP.
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Country Garden's January to June losses were on par with estimates it made in early August of between 45-55 billion yuan. Over the same period a year ago, the group posted a small profit of 612 million yuan.
"The shrinkage of the property sector, coupled with the not yet restored confidence of the capital market, exerted mounting pressure on the Company's business operation," Country Garden said in its filing to the Hong Kong stock exchange.
It added that it will "try its best to improve its operating cash flow by ensuring good sales performance, strive to revitalize under-performing assets and reducing inessential administrative expenses".
The earnings report came out as Country Garden is negotiating with creditors to reschedule debt payments so as to avert default.
A vote by bondholders on extending repayment terms was to have been held last Friday but it has now been postponed until Thursday, Bloomberg reported.
Country Garden on Wednesday also proposed issuing new stock to the tune of 255 million yuan.
The company has "tried its best" to make debt principal and interest payments, it said in the latest filing.
Its tenuous state has sparked fears of a collapse that could have far-reaching consequences for the Chinese financial system two years after the fall of Evergrande.
Country Garden, which was China's largest real estate firm last year, has four times as many building projects underway as Evergrande. When the latter halted construction projects in recent times it infuriated home buyers, who held demonstrations and stopped making mortgage payments in protest.
Halting construction is a socially sensitive issue in China because people generally pay for homes before they are finished.
Easier terms
Country Garden provides work for tens of thousands of people and is ranked by Forbes among the world's 500 largest companies. Its boss Yang Huiyan was until recently the richest woman in Asia.
The woes of Country Garden and Evergrande are causing further weakness to a property sector hit hard by the pandemic and China's economic slowdown.
These problems also discourage potential homebuyers, which could pile pressure on other real estate firms.
In a sign of the market's weakness, home prices in July fell at the quickest pace in a year, according to government figures.
Authorities are making moves to boost the key sector now, with major cities Guangzhou and Shenzhen taking steps to ease mortgage rules.
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Source: AFP
