Country Garden seeks shareholder approval on US$13 billion convertible bonds issue
A logo of Chinese developer Country Garden is pictured in Tianjin, China, Aug 18, 2023. (Photo: REUTERS/Tingshu Wang)
Country Garden Holdings said on Friday (Nov 14) it will seek shareholder approval for an offshore debt restructuring proposal aiming to deleverage by around US$11 billion, as well as for other loan repayment plans, which will see a dilution in their stakes.
Aimed at easing one of the biggest defaults in China's property sector, the debt restructuring proposal and loan repayment plans include issuance of up to US$13 billion of mandatory convertible bonds, as well as warrants and new shares.
Country Garden, which defaulted on its offshore debt in late 2023, won creditor approval last week on the restructuring proposal to cut US$14.1 billion of that debt by around 80 per cent.
Class-1 creditors, consisting of banks, will receive a two-year US$89 million loan under the restructuring scheme and up to 1.16 billion warrants priced at HK$0.60 each, which can be used to offset the loan.
Together with the proposed restructuring, the developer plans to issue up to US$39.5 million mandatory convertible bonds to resolve a bilateral loan with Chong Hing Bank, a unit of state-owned Guangzhou Yue Xiu.
It will also issue HK$43.8 million worth of new shares to Tai Fung Bank, 50.3 per cent owned by Bank of China, to settle unpaid interests under another bilateral loan.
The bond conversion prices are set well above the current share price of HK$0.54, and the instruments will convert into equity over time, significantly diluting existing shareholders but offering creditors a path to recovery.
Country Garden also plans to issue up to 15.5 billion shares to Concrete Win, controlled by Country Garden's chairlady Yang Huiyan and which has a 48 per cent stake in the developer, at HK$0.60 each, much lower than other conversion and new issue prices, to settle US$1.14 billion in shareholder loans once the restructuring is effective.
After all the plans are implemented, including a management incentive plan, controlling and existing shareholders' stakes would drop to 39.8 per cent and 20.1 per cent from 48 per cent and 51.6 per cent, respectively, while creditors would hold nearly 35 per cent shares.
Shares of Country Garden rose 1.9 per cent in the afternoon session, outperforming a decline in the sector. The broader Hang Seng Index was down 1.5 per cent.
The debt restructuring proposal and loan repayment plans come as China's property sector slump, now in its fourth year, continues to squeeze funding.
China Evergrande is in liquidation proceedings, while some peers have wrestled with protracted restructurings.
Country Garden itself has been working towards offshore relief since 2023 and now needs shareholder and regulatory approvals to implement the scheme.
The Hong Kong High Court has adjourned a hearing into a liquidation petition against the company to Jan 5, 2026.
Shareholders will vote on the bond and share issuance at the extraordinary general meeting on Dec 3, and the scheme is expected to be completed by the year-end.
