Country Garden stock drops on debt default warning amid cash crunch, weak sales

Country Garden (OTCPK:CTRYF) on Tuesday warned it may not meet all of its offshore debt obligations and could be in for debt restructuring, as the property developer’s liquidity position will remain “very tight in the short- to medium-term.” Its Hong Kong-listed shares dropped 9.5% on the news.

The warning comes at a time when Chinese real estate companies have been floundering under mounting debt, with many defaulting in recent months.

Country Garden’ (OTCPK:CTRYF), China’s largest private property developer, sales have been under “remarkable pressure,” with its September sales down 80.7% Y/Y at ~RMB 6.17B ($860.5M).

In addition, it faces significant uncertainty regarding asset disposals “as there has not been any industry-wide improvement in property sales.”

Country Garden (OTCPK:CTRYF) has not yet defaulted, although the debt non-payment “may lead to creditors demanding acceleration of payment or pursuing enforcement action,” it said in an exchange filing.

As of Tuesday, the cash-strapped company failed to make a HK$470M (~$60.1M) loan payment. It’d also missed coupon payments on some dollar bonds since last month.