New Delhi: Chinese property giant Country Garden, once one of China’s largest developers, faces a winding-up petition that has deepened the crisis in the country’s beleaguered real estate sector, coming weeks after a Hong Kong court ordered the liquidation of the prominent Evergrande Group.
Country Garden’s creditor Ever Credit Ltd– a unit of the Hong Kong-based chemicals and laminates manufacturer Kingboard Holdings – filed the winding-up petition in the Hong Kong High Court Tuesday over the non-payment of nearly HK$1.6 billion (US$204 million). The court has set a date of 17 May for the first hearing of the petition.
Real estate in China, which accounts for nearly a quarter of its economy, has been grappling with staggering losses since at least 2021, with over 50 companies defaulting on debt. Evergrande Group and Country Garden were two of the best known of these companies, given their debt burdens.
The property crisis in China has continued into 2024, with new home prices in 70 medium and large cities falling by 0.37 per cent in January, as reported by the South China Morning Post.
“It has come to the attention of the Company that a winding-up petition (the ‘‘Petition’’) dated 27 February 2024 was filed by Ever Credit Limited (the ‘‘Petitioner’’) at the High Court of the Hong Kong Special Administrative Region (the ‘‘High Court’’) against the Company,” said Country Garden in a regulatory filing to the Hong Kong Stock Exchange Wednesday.
The embattled property developer first defaulted on its overseas loans in October 2023.
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The trials of Country Garden
Country Garden was China’s largest property developer by contracted sales for years before falling to seventh in 2023, as reported by Bloomberg. In the first half of 2023, Country Garden announced a loss of $6.7 billion. The company reportedly owes over $150 billion.
In December 2023, its presales of unfinished apartments fell to $962 million, a 69 per cent decrease in comparison to December 2022, The New York Times reported last month.
“The Company will seek legal advice and take all necessary actions to protect its legal rights. Furthermore, the Company will seek legal measures to resolutely oppose the Petition, as the Board is of the view that the Petition does not represent the interests of other stakeholders and may impair the value of the Company,” said Country Garden in its regulatory filing.
Country Garden has promised to “oppose the petition vigorously”. It also promised to announce its restructuring plans to the market as soon as “practicable” after a deal is worked out with its off-shore creditors.
The filing of the petition does not mean that the company will be liquidated, but it is now up to the courts to decide its future.
Kingboard Holdings on 19 February issued a profit warning, based on its exposure to Country Garden. It is expected to see a decline in profit of up to 45 per cent, due to the allowance for credit loss of a loan to the property developer.
The news of the winding-up petition against Country Garden comes a month after a Hong Kong court ordered the liquidation of the Evergrande Group. Alvarez & Marsal, a management consulting firm, was appointed as the liquidator for Evergrande by the judge.
(Edited by Tikli Basu)
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