Country Garden’s sales remain at deflated level amid collapsed demand - South China Morning Post

Indebted Chinese developer Country Garden on Friday reported that its October sales remained near a punishing low established in September amid a collapse of buyer confidence that has pummelled the entire property market.

Contracted sales in October reached 6.31 billion yuan (US$865 million), according to a filing with the Hong Kong stock exchange. That is 2 per cent higher than September’s 6.17 billion yuan, which was the lowest point of the year for the company that was once mainland China’s largest private property developer.

The depressed sales could pose a challenge to Country Garden’s efforts to restructure its offshore debt by the end of the year or early next year. The developer hopes to start formal negotiations with offshore bondholders by February or March next year, according to a Reuters report.

Country Garden is deemed to be in default after missing a coupon payment of US$15.4 million on a dollar-denominated bond in October.

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Country Garden’s sales trend this year reflects the developer’s fortunes as well as those of the wider property market in the world’s second-largest economy.

From January to April, Country Garden’s sales ranged from 22.01 billion yuan to 25.01 billion yuan per month, according to previous exchange statements. In the May to July period, sales plummeted, ranging from 12.07 billion yuan to 18.20 billion yuan. Then the trough got even deeper, with August sales falling to 7.98 billion yuan and setting the stage for the low point in September.

On Wednesday, Ping An Insurance (Group) denied a Reuters report, citing sources, that the government had asked Ping An to play the hero and take over Country Garden. That would mean assuming debts of 257.9 billion yuan as of the end of June, according to the developer’s interim report.

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Of that amount, about 119 billion yuan was in foreign currencies, including US dollars and Hong Kong dollars, mostly in senior notes and corporate bonds. The company’s total liabilities stood at 1.3 trillion yuan versus 1.43 trillion yuan at the end of 2022.

Country Garden shares closed 1.33 per cent higher at HK$0.76 on Friday.

China’s overall home sales in October were relatively flat, with the top 100 developers recording total transactions of 406.7 billion yuan, 0.6 per cent higher than September, according to data compiled by Chinese real estate firm CRIC.

However, sales were down 27.5 per cent year on year.

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A liquidity crisis was triggered on the mainland after the government introduced its “ three red lines” policy in August 2020 to stem systemic risk from overleveraged developers. Weak developers were shut out of the loan and bond markets, precipitating some US$29 billion of debt defaults since the start of 2021.

Meanwhile, Beijing-headquartered developer Nan Hai said it would cease to be listed on the Hong Kong stock exchange as of November 16, according to a filing.

Trading in Nan Hai’s shares has been suspended since April 2022, and the company said a request to extend a deadline to review the delisting decision was rejected by Hong Kong Exchanges and Clearing, the city’s bourse operator.

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Nan Hai added that shareholders “who have any queries about the implications of the cancellation of listing of the shares are advised to obtain appropriate professional advice”.

In June last year, Nan Hai said creditors were freezing some of its assets after it failed to meet part of its financial obligations for its US$350 million notes. Unaudited revenue from Nan Hai’s cinemas plunged more than 70 per cent in 2020 and 2021, while real estate sales fell 35 per cent in 2020, widening to a 50 per cent slump in 2021, according to its financial reports.

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