Country Garden’s shares plunged 14% to HK$0.89 on Friday, putting it on track to close below HK$1 for the first time.
That compares with earnings of 1.91 billion yuan a year earlier. On Friday, local media Yicai reported Country Garden is preparing for restructuring and has hired a financial adviser, citing unidentified people. Investors are pricing in a worst-case scenario. A Country Garden dollar bond due January has fallen 14.7 cents to 8.7 cents this week, according to data compiled by Bloomberg. In December, it was trading at 75 cents. The firm’s debt was downgraded three notches Thursday by Moody’s Investors Service to Caa1 from B1.
“Due to the recent deterioration of sales and refinancing environment, the available funds in the book of the company have been continuously reduced, resulting in a phased liquidity pressure,” Country Garden said in Thursday’s statement.Country Garden has the largest pool of outstanding dollar bonds among China’s biggest property firms, excluding defaulters, with some US$9.9 billion outstanding, Bloomberg-compiled data show.
The prolonged slump in China’s property sector has brought previously sound companies to their knees, with firms such as Central China Real Estate Ltd, a state-backed developer, repeatedly using grace periods to buy time before stopping payments. “Collapse of another major private developer wouldn’t help with restoring confidence among prospective homebuyers,” JPMorgan Chase & Co analyst Frank Pan wrote in a report dated Wednesday.