Caixin
Sep 20, 2022 08:08 PM
BUSINESS

China’s Largest Developer Issues State-Backed Bond After Rating Cut

What’s new: Country Garden Holdings Co. Ltd., China’s largest real estate developer by sales, has issued a 1.5 billion yuan ($213.9 million) onshore bond guaranteed by a state-owned financial guarantor.

The China Bond Insurance Co. Ltd.-backed bond has the term of three years with a coupon rate of 3.2%, according to a Tuesday filing to the Hong Kong stock exchange.

On Monday, S&P Global Inc. lowered Country Garden’s long-term issuer credit rating to “BB” from “BB+” with a negative outlook, deeper into speculative territory. The ratings agency cited its “narrowing liquidity buffer due to weakened sales and a high amount of construction expenditure.”

Country Garden’s Hong Kong stock closed down 2.56% on Tuesday to HK$2.28 (29 U.S. cents) a share.

The context: Country Garden is one of the few Chinese private property firms that have managed to largely avoid the crises of liquidity, debt and confidence that have wracked the sector since last year. It retains the support of financial institutions, as regulators hope that relatively healthy developers would help underpin the sluggish market.

China Bond Insurance has provided a full guarantee “with unconditional and irrevocable joint and several liability,” which means it would repay all the principal and interest on the bond if the issuer defaults.

Despite its relative financial health, the property giant has still been impacted by the property market downturn as its sales dropped 39% year-on-year in the first eight months of 2022. S&P does not expect its sales to recover substantially this year, as 66% of its saleable resources are in smaller cities that have suffered a deeper decline than large metropolises.

Related: Distressed Chinese Developers Scramble for a Piece of $28.5 Billion Industry Bailout

Quick Takes are condensed versions of China-related stories for fast news you can use.

Contact reporter Guo Yingzhe (yingzheguo@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)

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