Country Garden: Default on dollar bond - problems on the Chinese real estate market

Country Garden: Default on dollar bond - problems on the Chinese real estate market

According to a report by finanzmarktwelt.de, the Chinese property developer Country Garden has officially defaulted on a dollar bond for the first time. The company has failed to pay interest on the bond on a timely basis, resulting in an event of default. Country Garden is one of the world's most indebted property developers and is now facing a major restructuring. The company's insolvency may have far-reaching consequences for the real estate market and industry in China.

A default by Country Garden could further undermine investor confidence in the Chinese real estate market. There is a risk that other property developers will have similar problems and will be unable to meet their payment obligations. This could lead to a chain reaction and further destabilize the real estate market.

The impact on China's real estate market could be severe. The real estate market is of great importance to the Chinese economy and accounts for around 20% of the gross domestic product. A collapse in the housing market would lead to a sharp drop in economic growth and potentially trigger a recession.

Country Garden's investors are affected by the default as they can only expect a small return on their investments. Country Garden's dollar bonds are already trading at about 5 cents. This shows that investors have little hope of getting their capital back. The company's shares have fallen about 74% this year.

The decision as to whether a credit event has occurred leading to insolvency is made by a panel of banks and investment managers. This decision also has implications for Country Garden dollar bondholders who have been trying to organize to negotiate a debt restructuring.

The Chinese authorities are already trying to revive the real estate market, but the measures taken so far have not been enough to change the situation. Real estate investment fell by 9.1% in the first nine months of the year. Potential home buyers are holding back as they fear builders may not be able to complete construction.

Overall, current developments at Country Garden show that the real estate crisis in China is becoming increasingly serious and is impacting the market and the industry. Further defaults and bankruptcies by property developers could follow and plunge the real estate market into a deep crisis. The Chinese authorities are faced with the challenge of stabilizing the real estate market and cushioning possible impacts on the economy.

Source: According to a report from finanzmarktwelt.de