Country Garden, China’s biggest private developer, warned on Wednesday of the risk of default if its financials continued to deteriorate and said it “deeply regretted” its record first-year losses. six months, reports News.ro with reference to Reuters.

Country Garden posted a net loss of 48.9 billion yuan (US$6.72 billion) in the January-June period, compared with a net loss of 6.7 billion yuan in the second half of 2022 and a net profit of 612 million yuan in in the first half of 2022.

The results came as Chinese authorities took steps to revive the troubled housing market, which accounts for about a quarter of the economy.

Trouble in the real estate sector has raised fears it could have a destabilizing effect on an economy already weakened by rising unemployment and falling demand.

Since the end of 2021, there have been many defaults on corporate debt in the real estate sector, resulting in unfinished homes and non-payments to suppliers and creditors.

Country Garden’s liquidity stress became public this month after the company missed a two-dollar coupon payment, first confirmed by the developer on Wednesday, and struggled to continue repaying private debt bonds, raising fears of contagion.

“If the group’s financial performance continues to deteriorate in the future, the group may not be able to meet its financial obligations under these loans, which could lead to a default on these loans and a cross-default on certain other loans,” the developer said in a statement filed to the financial regulatory body.

He added that he would consider debt management measures to address the remaining external debt by the end of June next year, including negotiations with onshore banks to renew and extend existing loans.

Country Garden said its first-half revenue rose 40 percent from a year earlier, but cost of sales rose 73 percent, while total debt was unchanged from the end of 2022 at 1.4 trillion yuan.

Its interest-bearing debt fell to 257.9 billion yuan, of which 108.7 billion yuan was due within 12 months, while the company had total equity of 101.1 billion yuan at the end of June.

“The company feels deep remorse over unsatisfactory performance,” the report says.

Some of Country Garden’s offshore creditors are in talks with a New York law firm and are considering options, including legal ones, by forming a group if the company tries to restructure its debt.

Kobre & Kim LLP told Reuters on Wednesday it was in talks with lenders interested in forming the group and weighing their options, including those specializing in distressed loans and experienced in using value-enhancing strategies in debt restructuring cases.

On Wednesday morning, Country Garden announced the issuance of HK$270 million ($34.4 million) in new shares to the investment arm of Hong Kong manufacturer Kingboard Holdings, which will reduce the unit’s outstanding debt to HK$1.6 billion.

The company said it would help “conserve cash resources… and reduce leverage.”

Many Chinese developers have so far posted losses or lower first-half profits due to lower domestic sales.

State-backed China Resources Land said in an earnings conference call on Wednesday that it expects home sales this year to be flat or see a slight decline due to a slowdown in long-term demand.

The company added that the number of visitors to its showrooms continued to decline in August.

China Resources Land was one of the few developers to post an increase in first-half profits. Its net profit increased by 30% compared to a year earlier. (News.ro)