China's Country Garden faces winding-up petition

28th Feb 2024 10:29

(Sharecast News) - Chinese developer Country Garden Holdings Company has been hit by a winding-up petition, it was confirmed on Wednesday, in the latest blow to China's embattled property sector.

The struggling developer said the petition had been filed by Ever Credit at Hong Kong's High Court, over the non-payment of a term-loan facility in the principal amount of around HK$1.6bn (£162m).

Country Garden said it would take "all necessary actions to protect its legal rights".

"Furthermore, the company will seek legal measures to resolutely oppose the petition, as the board is of the view that the petition does not represent the interests of other stakeholders and may impair the value of the company," it said.

In a statement to Reuters, Country Garden insisted: "The radical actions of a single creditor will not have a significant impact on our company's guaranteed delivering of buildings, normal operations and the overall restructuring of overseas debts."

China's property developers borrowed heavily to build up vast portfolios. But Beijing, concerned about soaring levels of debt, moved to crack down on the red-hot sector.

Demand also fell sharply, leaving the developers cash poor and struggling to service debt.

Country Garden, which has around 3,000 housing projects in China and employs around 60,000 people, has total liabilities of $186bn and reported a record $6.7bn loss last August.

It missed interest payments on offshore bonds last summer and eventually defaulted in October. It is currently negotiating a restructuring agreement with international creditors.

Ever Credit is understood to be wholly-owned by Hong Kong-based Kingboard Holdings, which has yet to comment on the petition.

Last month a court in Hong Kong ordered the liquidation of Country Garden's debt-laden rival Evergrande, which has liabilities of around $300bn.

The judge said Evergrande had been unable to come up with a credible restricting plan more than two years after it first defaulted on its offshore debt.

It remains uncertain, however, if mainland China's courts will recognise the ruling.