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Bond Market News
Country Garden’s Dollar Bonds Drop on H1 Loss Warning; Faces $2.9bn in Bond Payments By Year End
August 1, 2023
Country Garden (COGARD) warned of a net loss in 1H 2023 due to a decrease in gross profit margins for its real estate business and an increase in impairment provisions for property projects. This would compare with a net profit of RMB 1.91bn ($267mn) during the same period last year. COGARD reported its first ever full year loss last year, ever since it got listed in 2007. While COGARD does not have dollar bond maturities due in the remainder of 2023, its overall bond payments (interest and principal) across currencies total ~$2.9bn. Of this, about $2.3bn is due on thirteen of its onshore notes. With funding markets turning dry, IFR reported that COGARD canceled a primary share offering of HKD 2.34bn ($300mn), further adding to financing woes. Leonard Law, senior credit analyst at Lucror Analytics said, “Country Garden is at high risk of defaulting, unless there is imminent policy support from the government to aid the developer’s access to financing at the enterprise level… survivability of Country Garden hinges on the policy. Currently, it is uncertain if such support would come”. COGARD has said that it will take measures to ensure the security of cash flow – this includes reducing several operating expenses and accelerating loan collections.
COGARD’s dollar bonds continued to drop by over 2 points. Its 7.25% 2026s fell 2.3 points to trade at deeply distressed levels of 18.5 cents on the dollar.
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