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Country Garden recently stated that it would request shareholder approval for a wide-ranging offshore debt restructuring plan designed to cut its liabilities and stabilise operations following the developer's earlier default. The proposal includes issuing mandatory convertible bonds worth up to USD 13 billion, alongside warrants and new shares, resulting in substantial dilution for existing shareholders. The developer has already secured creditor approval to reduce a large portion of its offshore debt, and it now requires shareholder and regulatory consent to implement the measures. A separate vote on related share and bond issuances is scheduled for an extraordinary general meeting in the coming weeks.
Country Garden Holdings recently announced that it intended to seek shareholder approval for its offshore debt restructuring scheme, which aims to reduce approximately USD 11 billion in liabilities and support broader loan repayment efforts. The measures will result in a notable dilution of existing shareholdings once implemented. Advertisement
Designed to ease one of the most severe defaults within China's property sector, the restructuring framework involves issuing up to USD 13 billion in mandatory convertible bonds, as well as additional warrants and new shares. The developer, which fell into default on its offshore debt in late 2023, secured creditor support in the past week for a proposal to trim USD 14.1 billion of debt by nearly 80%.
Under the restructuring scheme, Class-1 creditors-primarily comprising banks-will receive a two-year USD 89 million loan and as many as 1.16 billion warrants priced at HKD 0.60 each, which may be used to offset the loan amount.
In addition to the central restructuring initiative, Country Garden plans to issue up to USD 39.5 million in mandatory convertible bonds to settle a bilateral loan owed to Chong Hing Bank, which is owned by state-backed Guangzhou Yue Xiu. The developer also intends to issue HKD 43.8 million in new shares to Tai Fung Bank, majority owned by Bank of China, to clear unpaid interest under a separate bilateral arrangement.
The conversion prices for the bonds are significantly higher than the prevailing share price of HKD 0.54. These instruments will convert gradually into equity, weighing heavily on existing shareholders' stakes while providing creditors with a means of recovering value.
Country Garden has also proposed issuing up to 15.5 billion shares to Concrete Win-controlled by chairlady Yang Huiyan and holding a 48% stake in the company-at HKD 0.60 per share. This will be used to settle USD 1.14 billion in shareholder loans once the restructuring takes effect. Following the completion of all plans, including a management incentive programme, the stakes held by controlling and existing shareholders are expected to fall to 39.8% and 20.1%, while creditors would collectively own nearly 35% of the equity.
Earlier this week, the company's shares climbed 1.9% during afternoon trading, outperforming a broader sector decline, with the Hang Seng Index slipping by 1.5%.
These restructuring steps come amid a prolonged downturn in China's property market, now in its fourth consecutive year, which has severely constrained financing channels. China Evergrande remains in liquidation proceedings, while several other developers continue to struggle with drawn-out restructuring efforts.
Country Garden has been pursuing offshore relief measures since 2023 and now requires both shareholder and regulatory approvals to move ahead. A hearing on a liquidation petition filed against the developer has been postponed by the Hong Kong High Court to early next year.
Shareholders are scheduled to vote on the bond and share issuances at an extraordinary general meeting set for the coming weeks, and the company expects the scheme to be completed by the end of the year.
Source - Reuters
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