Country Garden repays US$111 million bond in full, avoiding first onshore default in the process

Embattled property developer Country Garden Holdings has averted what would have been its first onshore default by repaying a 800 million yuan (US$111 million) bond.

The note, with a put option due on Wednesday, has been paid in full, the company said in a filing to the Shenzhen Stock Exchange, adding that the debt would be delisted on Thursday.

At a meeting last week at the Shenzhen exchange, most investors agreed not to exercise the put option on the bond, which would have allowed investors to demand repayment before its maturity next year.

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Earlier on Wednesday, some of the developer's top executives said they were taking a pay cut - the third since early 2022 - as the company focuses on delivering pre-sold properties and preventing further defaults on its debts amid stagnant home sales.

Yang Huiyan, chairman and largest shareholder in Country Garden Holdings. Photo: Weibo alt=Yang Huiyan, chairman and largest shareholder in Country Garden Holdings. Photo: Weibo>

Executive directors Yang Huiyan, Mo Bin, and Yang Ziying have "voluntarily requested" to reduce their annual pay to 120,000 yuan from 370,000 yuan, 3 million yuan, and 2 million yuan, respectively, according to a statement issued late on Tuesday.

Yang Huiyan, who is the chairman of Country Garden and the daughter of its founder, Yang Guoqiang, is currently the largest shareholder, with a 52 per cent stake. Chen Chong, who is a non-executive director and Yang Huiyan's husband, will also see his pay reduced to 120,000 yuan from 370,000 yuan.

Over the past two years, the company has adjusted the pay of its top executives "multiple times", leading to an 86 per cent overall drop in their remuneration compared to 2021 levels, a spokesperson said. Mo's annual pay before the most recent cut in September 2022 was 15 million yuan, and Yang Ziying's was 10 million yuan.

"Ensuring the delivery [of pre-sold properties] is Country Garden's most important corporate responsibility, as well as the 'bottom line' of the safety of the property market," said a spokesperson.

Among "self-support measures" to cut costs and overcome its cash crunch, top executives will also lose some perquisites, including free cars and access to dining halls, as well as physical exam refunds, the spokesperson said.

Country Garden is also reducing the floor area of its offices, and has cut administrative costs by close to 60 per cent in 2023, compared to 2021 levels, the spokesperson said.

In the first 11 months of 2023, Country Garden has delivered more than 500,000 houses across 240 cities in 31 provinces, the company said.

"China's property industry is still in a state of crisis at the moment, putting pressure on Country Garden's operations and debt repayment," said Shen Meng, director at Beijing-based investment firm Chanson & Company.

"We are yet to see policymakers roll out meaningful measures to help developers access financing. Meanwhile, demand is still weak, and this isn't going to change in the near term, either. Country Garden's majority shareholder and top executives are taking a pay cut to show their confidence in the company and to ease market concerns, but their actions are symbolic at best, and nowhere close to enough for its bond holders."

Country Garden has not responded to the Post's request for comments.

The company still faces many challenges. Last month, it posted total contracted sales of 6.31 billion yuan for October, only 2 per cent higher than its lowest point in September, according to its exchange filing.

In October, the company missed a coupon payment of US$15.4 million on a dollar-denominated bond, and has been deemed to be in default since then.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.

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