Country Garden Holdings said on Friday it will seek shareholder approval for an offshore debt restructuring proposal aiming to deleverage by around $11 billion, as well as for other loan repayment plans, that will see a dilution in their stakes.
Aimed at easing one of the biggest defaults in China’s property sector, the debt restructuring proposal and loan repayment plans include issuance of up to $13 billion mandatory convertible bonds, as well as warrants and new shares.
Country Garden, which defaulted on its offshore debt in late 2023, won creditor approval last week on the restructuring proposal to cut $14.1 billion of that debt by around 80%.
Class-1 creditors, consisting of banks, will receive a two-year $89 million loan under the restructuring scheme and up to 1.16 billion warrants priced at HK$0.60 each, which can be used to offset the loan.
Together with the proposed restructuring, the developer plans to issue up to $39.5 million mandatory convertible bonds to resolve a bilateral loan with Chong Hing Bank, a unit of state-owned Guangzhou Yue Xiu.
It will also issue HK$43.8 million worth of new shares to Tai Fung Bank, 50.3% owned by Bank of China, to settle unpaid interests under another bilateral loan.
The bond conversion prices are set well above the current share price of HK$0.54, and the instruments will convert into equity over time, significantly diluting existing shareholders but offering creditors a path to recovery.
Country Garden also plans to issue up to 15.5 billion shares to Concrete Win, controlled by Country Garden‘s chairlady Yang Huiyan and which has a 48% stake in the developer, at HK$0.60 each, much lower than other conversion and new issue prices, to settle $1.14 billion in shareholder loans once the restructuring is effective.
After all the plans are implemented, including a management incentive plan, controlling and existing shareholders’ stakes would drop to 39.8% and 20.1% from 48% and 51.6%, respectively, while creditors would hold nearly 35% shares.
Shares of Country Garden rose 1.9% in the afternoon session, outperforming a decline in the sector. The broader Hang Seng Index was down 1.5%.
The debt restructuring proposal and loan repayment plans come as China’s property sector slump, now in its fourth year, continues to squeeze funding.
China Evergrande is in liquidation proceedings, while some peers have wrestled with protracted restructurings.
Country Garden itself has been working towards offshore relief since 2023 and now needs shareholder and regulatory approvals to implement the scheme.
The Hong Kong High Court has adjourned a hearing into a liquidation petition against the company to January 5, 2026.
Shareholder will vote on the bond and share issuance at the extraordinary general meeting on December 3, and the scheme is expected to be complete by the year-end.
Reuters
