China: Country Garden share price soars after vote to restructure debt and avoid default
Shares in Chinese property developer Country Garden soared after investors backed proposals to restructure its debt, easing pressure on the embattled company.
The struggling developer agreed with investors over the weekend to extend the payment dates on a 3.9bn yuan (£424m) domestic bond, which was due to mature on Saturday.
The proposals secured the support of 56.08 per cent of Country Garden’s investors and means it will repay the debt in instalments over three years. Its shares closed 15 per cent higher in Hong Kong.
The move prompted relief among investors, with Hong Kong’s Hang Seng Index closing 2.5 per cent higher thanks to a strong performance from a number of developers.
Country Garden, which was previously considered one of the most reliable developers, has become a bellweather for the state of China’s enormous real estate market, which makes up around a quarter of GDP.
The sector has been engulfed in crisis after the Chinese government enforced policies designed to reduce leverage in the heavily indebted sector.
The intervention, which was designed to deflate the bubble, was too aggressive, slashing demand and leaving developers like Country Garden without a sufficient income stream to pay off their enormous debts. It missed interest payments of $22.5m (£17.8m) on international bonds earlier in August.
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.
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.