A creditor has filed a liquidation petition against China's Country Garden.
- Ever Credit Limited filed a "winding-up" petition against the troubled property developer on February 27, as stated in a regulatory filing.
- A loan worth 1.6 billion Hong Kong dollars ($204.4 million) was not paid by Country Garden, resulting in a petition against the company.
One of China's creditors filed a liquidation petition against the country's beleaguered property sector, deepening concerns about the sector's financial stability, the government announced on Wednesday.
Ever Credit Limited filed a "winding-up" petition against the troubled property developer on February 27, as stated in a regulatory filing.
A loan worth 1.6 billion Hong Kong dollars ($204.4 million) was not paid, resulting in the issuance of a petition.
Country Garden will vigorously oppose the petition and seek legal measures to do so. A court hearing will be held on May 17.
The company's Hong Kong-listed shares plummeted over 12%, significantly more than the 0.27% drop in the broader market.
Country Garden plans to actively communicate with its offshore creditors regarding its restructuring plan, and it does not anticipate the petition will significantly affect its offshore restructuring process.
The real estate market is struggling to regain confidence as the debt-laden property developer provides an update.
Earlier this month, the International Monetary Fund predicted that demand for new housing in China will decrease by approximately 50% over the next ten years.
In late January, Evergrande, a property giant, was ordered by a Hong Kong court to liquidate, which renewed concerns about China's struggling real estate sector. However, it seems that worries about a spillover have abated as Evergrande's issues appear contained.
Historically, China's property sector has been the foundation of its economy, contributing significantly to its GDP. In recent years, the industry has experienced rapid growth, driven by debt. However, this debt has put a strain on balance sheets, resulting in defaults by major developers.
Restructuring processes have been initiated for companies like Country Garden and Evergrande due to their struggles in repaying debt obligations.
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