China's immobile giant in a quandary: default risk in Rural Garden

Chinese developer group predicts it won't be able to meet its obligations: cash is under pressure.

Chinese real estate giant Evergrande filed for bankruptcy protection in the US on Aug. 17

While China's real estate crisis deepens. Evergrande defaulted on its debts in 2021, totaling more than 300 billion U.S. dollars (275.5 billion euros), it was the world's most indebted real estate company, sending shockwaves through financial markets around the world.

Country Garden shares on the Hong Kong stock exchange collapsed

The Chinese construction giant has warned it may not be able to repay its debt. Country Garden shares closed down 10.7% to 0.75''Hong Kong dollars. The quote has lost nearly 72% since the beginning of the year.

"Cash is under significant pressure" The company "anticipates that it will be unable to meet all of its overseas payment obligations when due and within the deferral period, including - but not limited to - those denominated in dollars," Country Garden said in a statement, emphasizing that the group's cash position remains "under significant pressure." Sales and financing are meeting "significant challenges" in the current "unfavorable market conditions," and available resources continue to diminish, the company explained. Previously considered financially sound, Country Garden is also facing a real estate crisis in China that threatens an increasing number of''companies in the industry, as happened with Evergrande. Country Garden was already on the verge of default in September, but managed at the last minute to pay $22.5 million in interest on loans during a 30-day grace period.

The group is asking creditors for patience. The problem is that 'non-payment could prompt the group's creditors to demand acceleration''to repay the debt owed to them or to commence legal proceedings'," the press release indicates. The company "requests patience from creditors to allow it time to assess the current difficulties and work with its advisors to develop the most pragmatic and optimal solution for all stakeholders." Country Garden is considered the largest real estatedeveloper in China and has four times as many construction sites as Evergrande. A default, given the scale of the group, operators warn, would be disastrous not only for the entire real estate market, but would also cause a shock to the entire Chinese economy, which is already in a slowdown phase, and would also have social repercussions. Country Garden had an estimated debt of 1.43' by the end of 2022