Country Garden Selling Stake in Chipmaker to State-Owned Firm for $270M

China’s Country Garden Holdings has agreed to sell its stake in a mainland chipmaker for RMB 2 billion ($270 million) as the troubled developer seeks to ease its ongoing cash crunch.

The 1.56 percent stake in Changxin Technology is held by a private fund in which a wholly owned unit of Country Garden, Haikou Country Garden Venture Capital Technology, carries a 98.65 percent interest, the company said Friday in a stock filing. The stake’s buyer is a firm controlled by the government of Hefei, the Anhui provincial capital where Changxin is headquartered.

The South China Morning Post first reported the deal in June, citing sources who said the disposal was part of a strategy to optimise the asset-liability structure at China’s onetime largest developer, which is trying to work through its debt after defaulting on $11 billion in offshore bonds in 2023.

“The group is actively resolving the periodic liquidity pressure,” Country Garden said Friday. “As the group only holds a minority interest in Changxin Technology, the company is of the view that the disposal and realising the value of the sales equity will be beneficial to the company.”

Sales Picture Dims

Country Garden submitted the preliminary terms of its offshore debt restructuring plan to creditors in late October, Reuters reported last month. The proposal came with a lowered cash flow projection than previous estimates shared with some offshore creditors earlier this year, sources told the news agency.

Foshan-based Country Garden had signalled progress when it reported a 31 percent year-on-year decline in October contracted sales — narrowing from a 41 percent drop in September — after a government-directed stimulus blitz targeting the real estate market. But the builder led by chairwoman Yang Huiyan suffered a setback in November as contracted sales tumbled 52.3 percent year-on-year to RMB 3.01 billion.

In a post on Country Garden’s official WeChat account earlier this month, Yang pledged to deliver homes to buyers on time and maintain communications with authorities and stakeholders.

“Although we are facing difficulties in the short term, as long as we persevere and work hard, we will definitely be able to overcome the storm and usher in a bright future,” the daughter of company founder Yang Guoqiang said in the post.

Wind-Up Hearing Looms

Country Garden announced in March that it would delay the publication of its 2023 financial results, citing the need to collect more information to make appropriate accounting estimates and judgments. The postponement led to the suspension of trading in Country Garden’s Hong Kong-listed shares from 2 April.

In February, the developer was hit with a winding-up petition in Hong Kong filed by a unit of Kingboard Holdings, due to non-repayment of a term loan worth HK$1.6 billion ($204 million) including accrued interest. The hearing is currently adjourned until 20 January of the new year to give Country Garden time to assemble its debt restructuring plan.

Reuters reported in March that Country Garden had hired New York-based advisory firm Kroll to conduct a liquidation analysis of the company to assess potential recovery rates for creditors.