Country Garden Plans $13 Billion Bond Issue for Debt Restructuring
BENGALURU: China's Country Garden Holdings announced on Friday that it will issue bonds worth approximately $13 billion as part of an offshore debt restructuring plan. This move is designed to ease one of the biggest defaults in the country's property sector.
The restructuring plan includes the issuance of warrants and new shares, which could potentially cut more than $11 billion in debt if fully implemented, according to the company. The developer plans to issue zero-coupon mandatory convertible bonds, consisting of $7.5 billion for scheme consideration payments and $5.4 billion for additional creditor settlements, as detailed in a company filing.
A smaller tranche of $39.5 million will be used to resolve a bilateral loan, the company added. The bond conversion price is set well above the current share price, and the instruments will convert into equity over time, significantly diluting existing shareholders but offering creditors a path to recovery.
Concrete Win, controlled by Country Garden's chairlady Yang Huiyan, has committed to subscribing to new shares at HK$0.60 each to settle $1.14 billion in shareholder loans once the restructuring is effective. Country Garden will issue shares at HK$0.60 apiece under a specific mandate to be approved by independent shareholders at an upcoming extraordinary general meeting.
Class-1 lenders, consisting of banks, will receive a two-year $89 million loan under the scheme and up to 1.16 billion warrants priced at HK$0.60 each, which can be used to offset the loan. This plan comes as China's property sector continues to struggle with a funding crunch, now in its fourth year. China Evergrande is in liquidation proceedings, while other peers have been dealing with protracted restructurings.
Country Garden has been working towards offshore relief since 2023 and now requires shareholder and regulatory approvals to implement the scheme. The extraordinary general meeting on December 3 will vote on the bonds and share issuance, with the scheme expected to be completed by the end of the year.
This move is a significant step in the company's efforts to stabilize its financial position and continue operations amidst the challenging market conditions in China's property sector.
