Facing a potential financial collapse, the embattled Chinese property developer Country Garden on Thursday denied rumors that its two most prominent executives had fled China.
Country Garden took the unusual step of issuing a statement on its WeChat social media account declaring that Yang Guoqiang, the company’s founder, and his daughter Yang Huiyan, its chairwoman and majority shareholder, were “currently working normally in China.” It said rumors that the two had left the country were having “an adverse impact” during “a difficult period” for the company.
The statement, issued on Thursday, came a day after the company faced a deadline to make a $15 million interest payment on an overseas bond. Missing the payment would allow creditors to declare the debt-laden firm in default.
In a sign of China’s deepening property crisis, Country Garden, once the country’s biggest home builder, is scrambling to stave off collapse amid a sharp downturn in sales. For the last few months, it has been unloading assets and selling shares to raise money to meet its significant debt obligations.
Last week, Country Garden, with $187 billion in liabilities, said it expected to miss an overseas debt payment, fueling speculation that it was preparing to default on its loans. The company said the property slump had put its cash position “under significant pressure.”
Since that announcement, investors have been closely watching whether Country Garden would make an interest payment on a dollar-denominated bond due in 2025. The company had already missed the initial deadline to make the payment last month, and then had a 30-day grace period to deliver the missing funds.
In a report on Wednesday, research firm CreditSights said holders of that bond had not received payment yet.
“The road to restructuring is likely to be long and bumpy,” research firm CreditSights wrote in the report, referring to Country Garden.
A Country Garden spokeswoman declined to comment on whether it had made the payment or not.
Country Garden may now face a fate similar to China Evergrande, which filed for bankruptcy protection in August and is negotiating with creditors on how to restructure its debt. The two companies once competed to be China’s biggest nonstate-owned property developer, but they are now sifting through assets for ways to repay some of what they owe to their creditors.
Evergrande is also facing a different set of problems. The company announced last month that Hui Ka Yan, its chairman and billionaire founder, was under suspicion by the authorities of criminal wrongdoing. Evergrande’s statement seemed to confirm reports that Mr. Hui was under a form of house arrest by the Chinese authorities. Other current and former Evergrande executives are now entangled in criminal investigations in China.
Market confidence in China’s property industry has fallen sharply. The government reported on Wednesday that investments in real estate development were down 9.1 percent in the first nine months of the year compared with the same period in 2022.
A default by Country Garden, once considered a model of fiscal responsibility in a Chinese property industry awash with reckless borrowing, would underscore the depth and scope of China’s real estate crisis. In the last three years, dozens of Chinese property developers have failed to pay off their debts, but Country Garden had largely remained above the fray.
Country Garden was often celebrated for the rags-to-riches story of its founder, Mr. Yang, a former farmer and construction worker who once stated that he was so poor growing up that he didn’t wear shoes for the first 17 years of his life.
Before the company’s stock listed in a public offering in 2007, he transferred his majority stake in Country Garden to his second daughter, Ms. Yang. At one point, she was the richest woman in Asia with a fortune estimated as high as $29 billion.
Ms. Yang served as co-chair of the company with her father until March when she took over the role exclusively. She still holds 53 percent of Country Garden’s shares.
In late July, as Country Garden’s financial problems deepened, Ms. Yang donated roughly $800 million worth of stock in the company’s services subsidiary to a family charity run by her sister. The Hong Kong-based charity works on a wide range of causes including supporting science, education and culture as well as promoting rural revitalization in mainland China. A property developer’s services arm to support existing homeowners often remains profitable even if demand for new homes dries up.
Country Garden said last month that it still needed to repay nearly $15 billion in debt within the next 12 months. As presales of Country Garden’s unfinished apartments have plummeted, the company’s finances have deteriorated. It said it lost $7.1 billion in the first six months of the year. Presales were down 44 percent in the first nine months of 2023 from a year earlier.
Last week, Hong Kong-based Kingboard Holdings said it had taken legal action against Country Garden for missing payments on roughly $200 million of debt due in installments by the end of December. Last month, Country Garden raised $34 million by issuing new shares with the proceeds going to Kingboard, a materials and chemicals manufacturer with a property division owed money by Country Garden.