Recently, Country Garden, the fate of this trillion-level real estate company, has once again become the focus of attention. The company announced that Hong Kong Kingboard Group filed a winding-up petition against Country Garden with the High Court of the Hong Kong Special Administrative Region on February 27, which aroused widespread concern in the market.
Behind this winding-up petition was Kingboard's desperation for Country Garden to repay its debts. Kingboard no longer expects to recover its debts from Country Garden, and has turned to legal channels to seek some of the funds back or force Country Garden to repay its debts.
Country Garden's debt problems stem from a financing agreement signed with Kingboard Group in December 2021, involving 18HK$800 million term loan. According to the agreement, Country Garden was supposed to repay the principal and interest in instalments, and repay the final instalment by the end of 2023. However, by October 2023, Country Garden had announced that it would not be able to repay its overseas debts on time and announced the initiation of restructuring, which was essentially a public announcement of debt default.
For Kingboard, this debt has been included in the scope of restructuring and obviously cannot be recovered as scheduled. Kingboard Group had issued a statutory demand for repayment of debts to Country Garden, but for Country Garden, which was already mired in debt, this was tantamount to a drop in the bucket. The current balance of principal and interest on this debt is about 15HK$9.8 billion.
Country Garden is currently facing serious cash flow problems. According to public data, as of the beginning of 2023, Country Garden has as many as 1.07 million properties that have not yet been delivered, which means that millions of owners are waiting for delivery. In this case, ensuring the delivery of the building has become the company's top priority, which has entered the supervision account, and it is difficult to transfer funds freely.
Country Garden's situation bears a striking resemblance to Evergrande's. Evergrande faced a winding-up petition in June 2022 and was finally ordered to wind-up in January 2024 after several postponements. Country Garden is also currently in trouble on the sales side, with blocked payment collection and imminent financial crisis, and it seems to be following the old path of Evergrande.
Hotspot Engine Plan Financing Dilemma and Management StrategyCountry Garden's financing channels have narrowed, and in the face of the lack of funds and solvency, it can only choose to delay again and again. In addition, Country Garden's management is also learning from some of Evergrande's "refuge" strategies, such as Yang Huiyan's transfer of a 20% stake in Country Garden Services to the family**, worth more than HK$6 billion.
As of the end of June 2023, Country Garden's total liabilities were as high as 136 trillion yuan, second only to Evergrande's 238 trillion yuan, ranking second in the debt ranking of the real estate industry. Its business model of high leverage, high debt and high turnover is the same as that of Evergrande.
Country Garden's current situation is not only a reflection of its own problems, but also a reflection of the current deep-seated predicament of the real estate industry. Hundreds of millions of debts and tens of thousands of unfinished buildings are in stark contrast to the huge wealth of the founder's family, which is not only the predicament of Country Garden, but also the challenge of the entire industry and even the times.