By Aaditya GovindRao and Clare Jim
(Reuters) -Chinese property developer Country Garden said on Friday it had reached an agreement with a key bondholder group and was close to finalising negotiations with a group of bank creditors.
The company defaulted on its offshore debt in late 2023 and is now in a restructuring process that aims to cut $14.1 billion of that debt by 78%.
The restructuring support agreement with the key bondholder group holding 30% of the embattled developer’s $10.3 billion existing offshore bond debt came ahead of a liquidation court hearing in Hong Kong on May 26.
The agreement, though reached one month later than expected, would be useful for Country Garden to show the restructuring progress in its defence against the petition.
Its shares jumped as much as 8.1% in early trading on Friday, before narrowing gains to 2.3%, while the Hang Seng Mainland Properties Index was flat.
The real estate firm has offered five restructuring options to creditors including extending the maturity by as much as 11-1/2 years alongside choosing mandatory convertible bonds and new debt instruments.
As sweeteners, its controlling shareholder, Chairperson Yang Huiyan, has agreed to convert her $1.15 billion shareholder loan.
Yang will also buy a 60% stake in the company’s Malaysian unit Country Garden Pacificview, for $50 million and use the balance to subscribe to more shares in the company.
The chairperson held a 52% stake in Country Garden as of the end of 2023, according to data compiled by LSEG. Her shareholding will reduce to not less than 40% after the debt restructuring is completed, the company said.
Country Garden urged other creditors to sign the restructuring agreement by May 23. It offered an incentive of 0.1% early-bird fee for creditors who sign by May 9.
A restructuring proposal normally requires support from more than 75% in creditor value to pass.
Once China’s top developer by sales, Country Garden’s downturn in fortunes intensified a debt crisis that was already gripping rivals such as Evergrande.
In March, it said its net loss attributable narrowed to 32.8 billion yuan ($4.48 billion) in 2024, down from a record loss of 178.4 billion yuan for 2023, as it battles a liquidation petition filed by Ever Credit, a unit of Hong Kong-listed Kingboard.
($1 = 7.3140 Chinese yuan renminbi)
(Reporting by Aaditya Govind Rao and Roushni Nair in Bengaluru and Clare Jim in Hong Kong; Editing by Stephen Coates)
