The announcement lifted the developer’s shares, which rose as much as 4 per cent on Monday, outperforming the market benchmark’s 0.7 per cent gain, although analysts were less than impressed, saying challenges abounded for the embattled company.
The partnership between Country Garden’s unit Guangzhou Xingchengsi and Guangdong Zhongwei, which is engaged in the business of supply chain, science and technology promotion and application services, will bridge the financing gap by providing 2.8 billion yuan (US$384 million) for the project located in what is billed as Guangzhou’s second business district. Guangdong Zhongwei’s cash injection will entitle it to 47.46 per cent of the completed units of the building.
“The introduction of Guangdong Zhongwei as a partner for the joint development of the Guangzhou property will be a timely and much-needed solution to the difficulties faced by the Group in realising the Guangzhou property, ” the Foshan-based Country Garden, once China’s largest home builder by sales, said in a stock exchange filing on Sunday.
The project is hindered by various complexities, according to the developer’s filing. The property is mortgaged as security for notes due next year worth 1.7 billion yuan while one of the unit’s shareholders is also faced with a freeze order, resulting in difficulties raising funds.
BOC, China Everbright among banks injecting billions into ‘whitelist’ properties
BOC, China Everbright among banks injecting billions into ‘whitelist’ properties
“Given such complexities and the substantial funds that will be required for the project it is very difficult for the group to resume construction or dispose of the Guangzhou property,” the statement said.
But analysts said much more was needed as the company struggles under 257.9 billion yuan of debt with about 109 billion yuan of borrowings coming due in June 2024.
“One swallow does not a summer make,” said Louis Tse Ming-kwong, independent stock analyst. “Country Garden will still need to find money to meet its interest payments this year.
Even if they say Country Garden is on the White List, what does that mean?” he said referring to the so-called whitelist mechanism for private developers to guarantee presales delivery and prevent further defaults.
Country Garden has been working on a debt restructuring proposal after it defaulted on US$11 billion bonds issued to offshore investors. On January 16, the company appointed KPMG China as its principal financial adviser to help with the restructuring of its offshore liabilities.
“Currently residential projects in first-tier cities would be easier to attract partners while those in lower tier cities and non-residential projects would be more challenging,” said Martin Wong, director and head of research and consultancy for Greater China at Knight Frank.
Last month, it was the subject of a winding-up petition filed by Ever Credit, a wholly owned unit of Kingboard Holdings, owing to a HK$1.6 billion (US$204 million) default on a term loan including accrued interest.