Country Garden sells Chinese mall stake as developer tackles offshore debt

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Country Garden, one of the most prominent victims of China’s real estate cash crunch, is selling a Rmb3bn ($420mn) stake in a mall operator to tackle the fallout from an international bond default.

The property developer said in an exchange filing on Thursday it would sell a stake in Zhuhai Wanda Commercial Management Group, a mall operator that is part of Dalian Wanda Group. It said the proceeds would be used for “offshore restructuring”.

Country Garden, once China’s biggest private developer by sales, followed in the footsteps of highly leveraged peers such as Evergrande when it defaulted on international debts in October this year.

Like many of them, it had borrowed on international bond markets and amassed liabilities of Rmb200bn in mainland China as it rode a wave of construction and urbanisation.

That unwound dramatically in 2021 when Evergrande, China’s most indebted developer, defaulted. The slowdown in construction and transactions that followed has not abated despite supportive efforts from Beijing.

Country Garden’s default in October, which refocused international scrutiny on China’s property market, came less than a year after the company was included in special government measures aimed at supporting “high-quality” developers across a struggling market. Prices of new homes fell in October for a fourth straight month.

The Zhuhai Wanda stake is being sold to Dalian Wanda and related parties. Dalian Wanda, which was one of the main drivers of an era of outbound investment that ended in 2018, narrowly missed defaulting on a bond itself in July. Its billionaire founder Wang Jianlin this week also reduced the company’s stake in its mall operator subsidiary, which is struggling to fulfil plans to list.

In a separate statement to the Shenzhen Stock Exchange, Country Garden said it had repaid an onshore bond worth Rmb800mn, highlighting a contrast between onshore and offshore repayments.

The company has hired restructuring advisers ahead of likely negotiations with offshore creditors, to whom total debt is about $13bn, according to Bloomberg.

Evergrande, which has more than twice that amount outside China, saw its own restructuring plan derailed in September after two years of discussions, with the group citing regulatory constraints, and following the apparent arrest of its chair Hui Ka Yan.

Additional reporting by Wang Xueqiao in Shanghai