2023-08-14 09:09:48
The action of the developer Country Garden, one of the largest real estate groups in China, lost more than 18% on the stock market on Monday, at a time when the precarious financial health of the company and its astronomical debt worry the markets.
Its situation is the direct consequence of a crisis of unprecedented magnitude in real estate, a sector which, along with construction, has long represented a quarter of China’s GDP (Gross Domestic Product).
Country Garden is a private giant in its country, present mainly in secondary towns and which employs tens of thousands of employees.
The group is listed in the Forbes list of the 500 largest companies in the world and its boss, Yang Huiyan, was until recently the richest woman in Asia.
Country Garden, which has long been reputed to be financially sound, was unable last Monday to pay two interest repayments on loans.
The group has a 30-day grace period and risks defaulting in September if it does not pay.
Against all expectations, the company also announced during the weekend to suspend the quotations of a dozen bonds as of Monday.
This decision is a source of nervousness on the markets, because the group estimated its debt at some 1,152 billion yuan (150 billion euros) at the end of 2022. The Bloomberg agency puts it at around 1,400 billion yuan (176 billion euros). ).
Logically in the face of this unfavorable context, the Country Garden share sold Monday at the close of 18.3% on the Hong Kong Stock Exchange, where the group is listed. The title has lost 42% of its value in the space of a month.
Letter of apology
The boss of Country Garden admitted Friday in a letter of apology that her company was facing “the greatest difficulties” since its creation because of the economic situation.
Yang Huiyan, who became a billionaire at the age of 25 by inheriting the shares of the group founded by her father, however reassured regarding the combativeness of Country Garden to get by and survive.
Like Evergrande, its competitor in debt to the tune of more than 300 billion euros, any collapse of Country Garden would have catastrophic repercussions on the Chinese financial system and economy.
The group, which is due to publish its half-year results later this month, says it expects a net loss of around 45 to 55 billion yuan (between 5.6 and 7 billion euros).
To add to the pressure, 31 billion yuan (3.9 billion euros) of bonds will mature in 2024, according to the rating agency Moody’s, which on Thursday lowered the group’s solidity rating to “Caa2”, synonymous with “very high credit risk”.
Major risk
The housing reform in China, which created a genuine real estate market at the end of the 1990s, led to a meteoric boom in the sector, maintained by social norms, the acquisition of property often being a prerequisite for marriage.
But the massive indebtedness of promoters has been perceived in recent years by the government as a major risk for the country’s economy and financial system.
To reduce the sector’s indebtedness, Beijing gradually tightened the conditions for access to credit for developers from 2020, which dried up the sources of financing for groups already in debt.
A wave of defaults followed, notably that of the Evergrande group, which undermined the confidence of potential buyers and reverberated throughout the sector, once morest the backdrop of an economic slowdown in China.
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