Country Garden Yet to Get Key Bondholders’ Support for Debt Plan

(Bloomberg) -- A key bondholder group of Country Garden Holdings Co., one of China’s most closely watched developers ensnared in the broader property crisis, isn’t on board with restructuring terms unveiled Thursday, people familiar with the matter said.

The new proposals by Country Garden aren’t supported by the so-called ad hoc group, which holds more than 30% of the developer’s outstanding $10.4 billion of notes, according to the people. 

Discussions with the builder, which started in November, slowed down in the final week of December due to disagreement over restructuring terms including on topics such as the conversion prices of mandatory conversion bonds and debt payment dates, the people said.

That all underscores the difficult path forward for Country Garden, once China’s biggest builder by sales. The builder defaulted on dollar debt in 2023, underscoring the depth of the nation’s real estate crisis which continues to weigh on growth. The firm’s contracted sales declined 73% last year, according to Bloomberg calculations based on its disclosure.

Helmed by one of China’s richest women, Yang Huiyan, the builder’s sheer size has made it important to the economy, where the property market had been a key driver of growth.

The firm said Thursday it reached an understanding with a coordination committee comprising seven banks on a new proposal that would slash debt and lower borrowing costs. But the builder would need support from a much broader range of creditors. Generally, restructuring proposals require acceptance by at least 75% of overall creditors including bondholders before they can move forward.  

The ad hoc group and Country Garden also tussled over the builder’s proposal to convert a shareholder loan into shares of the builder’s offshore subsidiary, which operates a large development project in Malaysia, the people said.

However, Country Garden shares are expected to resume trading shortly, which would help the parties decide the conversion price of the mandatory conversion bonds, the people said. 

Country Garden didn’t immediately comment when contacted.

The company said in July it expected key creditor groups to agree on a debt-term sheet by the end of September. It missed the self-imposed target date, Bloomberg previously reported. 

The ad hoc group is still willing to continue the talks with the builder and its coordination committee to finalize the restructuring negotiations, the people said. 

The creditor group had previously hired PJT Partners Inc. as financial adviser and Kirkland & Ellis LLP as legal adviser. PJT declined to comment. 

--With assistance from Emma Dong.

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