““One shall pick himself up from where he has fallen.””
Chinese property developer Country Garden Holdings resorted to aphorisms after warning of a loss and suffering another ratings downgrade of its debt.
Shares of embattled China property developer Country Garden Holdings Co. Ltd. tumbled Friday after it warned of potentially losing billions in the first half of the year following reports of missed bond payments earlier in the week.
Shares of Country Garden
2007,
-5.77%
sank as much as 14% in Hong Kong trade, adding to a difficult week that has seen shares drop 31%. On Thursday, Moody’s Investors Service downgraded the developer deep into junk territory after it apparently missed $22.5 million of interest payments due Monday on debt with a face value of $1 billion.
In a statement to the Hong Kong stock exchange late Thursday, Country Garden said it expects a net loss of roughly RMB45 billion ($6.25 billion) to RMB55 billion ($7.62 billion) for the first half of the year, versus a profit of RMB1.91 billion in the same period a year ago. That would mark its first interim loss since going public in Hong Kong 16 years ago.
“The expected net loss was mainly due to the decrease in gross profit
margin of the real-estate business and the increase in impairment of property projects as a result of the decline in sales in the real-estate industry, as well as the expected foreign exchange loss resulted from foreign exchange fluctuations,” the developer said.
Country Garden’s troubles have sparked fresh concerns over China’s highly indebted real-estate sector and possible contagion to broader markets. In 2021, the meltdown of rival developer China Evergrande Group sparked a selloff for China stocks that even briefly triggered losses on Wall Street.
China’s CSI 300 index
XX:000300
was down 2.3% on Friday, for a weekly loss of over 3%. The Hang Seng
HK:HSI
finished down nearly 0.9%, off 2.3% for the week.
Speculation over Country Garden has been simmering for weeks. The country’s real-estate sector has been weighed by a major debt load amassed over the past few decades, and hampered by China’s overall struggle to rebound from the pandemic.
Fresh data on Friday revealed that Chinese banks in July issued a smaller-than-forecast amount of new loans, a sign of continued weak credit demand even as the government urges more lending to businesses and households.
Related: China’s property woes offer a window into the demise of the country’s boom times
Country Garden said China’s property market still hasn’t rebounded from 2021 and that capital markets need time to restore confidence. “In particular, due to the recent deterioration of sales and refinancing environment, the available funds in the book of the company have been continuously reduced, resulting in a phased liquidity pressure,” said Country Garden.
The Guangdong, China-based company laid out four steps to right its ship, saying it will firstly “spare no effort to ensure delivery,” of projects nationwide; resolve phased liquidity pressures, by adopting debt management measures; ensure orderly operation with “sufficient net assets and abundant land reserves;” and strengthen organization and leadership, noting that it has set up a special task force headed by the chairman of the board, Yang Huiyan, who is also a controlling shareholder.
According to Bloomberg’s Billionaire Index Yang has a net worth of $5.3 billion from property investments, adding that her father co-founded Country Garden in 1992 and shifted over his company stake to her in 2005. Some are hoping Yang will dip into that vast wealth pile to help bail out the developer.
Worth just under 1 Hong Kong dollar on Friday, Country Garden shares fetched more than HK$16 each at their height in early 2018.
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