China: Country Garden avoids default after making interest payments on offshore bonds
China property developer Country Garden made interest payments on two US dollar bonds just before a grace period was coming to an end, ensuring it avoided default.
Citing a person familiar with the matter, Reuters reported that the developer had made late payments on the bonds totalling $22.5m. The payments, which were initially due on 6 August, were made before a thirty day grace period ended today.
Country Garden’s fate has become indicative of the wider Chinese property market. While the total paid was relatively modest, failure to pay would have raised question marks for the market as a whole as well as the fairly limited intervention from the Chinese government.
The payment comes just days after the struggling developer agreed with investors to extend the payment dates on a 3.9bn yuan (£424m) domestic bond, which was due to mature on Saturday. Payments will now be made in instalments over the next three years.
In its results published last week, Country Garden reported a record $6.7bn (£5.2bn) loss for the first six months of the year.
In an attempt to prevent the downturn in the property sector derailing the entire economy, Chinese policymakers have been attempting to stimulate demand in the sector without launching a major fiscal stimulus.
At the end of last week a number of regional Chinese cities cut the minimum level of down payments on property purchases in an attempt to boost demand in the ailing property sector. Interest rates have also been cut to lower mortgage costs.
The property slowdown has impacted the wider Chinese economy. New data out this morning showed that the purchasing managers’ index fell to 51.8, its lowest level in eight months. Economists had expected a reading of 53.6.