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China’s Country Garden narrowly avoids default: Bloomberg

China's Country Garden narrowly avoids default: Bloomberg
Source: Video Screenshot

Struggling Chinese developer Country Garden has made multi-million-dollar interest payments on two outstanding loans, reports said Tuesday, narrowly avoiding what would have been its first default.

The firm in August said it was unable to make the payments, worth $22.5 million, and was given a 30-day grace period.

That grace period was due to end either Tuesday or Wednesday, but the company paid the interest, Bloomberg News reported citing sources.

Country Garden told AFP it had no comment on the repayment, which was also reported by Chinese media.

One of China’s biggest builders, Country Garden had racked up debts estimated at 1.43 trillion yuan ($196 billion) by the end of 2022, and last week reported a 48.9 billion yuan loss for the first six months of the year.

On Saturday the firm reportedly won approval from creditors to extend a deadline for a key bond repayment worth 3.9 billion yuan to give it time to recover financially.

Had that not been repaid, the company would have faced the prospect of becoming the biggest Chinese real estate firm to default since rival Evergrande in 2021.

The company is still far from in the clear, however, with more loan repayments due in the coming weeks.

Country Garden’s cash flow problems have ignited fears that it could collapse with consequences for China’s economy, which is already suffering from record-high youth unemployment, flagging consumption and a broader crisis in the real estate sector.

Moody’s further downgraded its credit ratings last week by three notches from Caa1 to Ca, indicating obligations that are “highly speculative and are likely in, or very near, default”.

The move was an outcome of the firm’s “tight liquidity and heightened default risk, as well as the likely weak recovery prospects for the company’s bondholders”, the ratings agency said.

The company is estimated to “not have sufficient internal cash sources to address its upcoming offshore bond maturity”, according to Moody’s.

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Agence France-Presse (AFP) is a French international news agency headquartered in Paris, France. Founded in 1835 as Havas, it is the world's oldest news agency.

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