Country Garden Selling $34M in Shares to Pay Off Kingboard Loan

Country Garden’s scramble to make good on debts continued Wednesday, with the Chinese homebuilder agreeing to sell HK$270 million ($34.4 million) in new shares to Kingboard Holdings in order to make a loan payment to the Hong Kong-based laminates maker and property investor.

The new shares represent 1.27 percent of the existing issued share capital of Country Garden Holdings, the developer said in a filing with the Hong Kong stock exchange. Kingboard will subscribe at HK$0.77 a share, or a 15.4 percent discount to Tuesday’s closing price of HK$0.91 for Country Garden’s HKEX-traded shares.

The total consideration for the shares will be set off against the loan payment amount, which is more than HK$318.7 million, and no cash proceeds will be received by Country Garden from the share subscription. The outstanding loan principal of nearly HK$1.6 billion is to be paid in instalments until December of this year.

“The directors are of the view that the subscription enables the company to capitalise in part the payment amount and minimise cash outlay, thereby preserving the cash resources of the group and reducing the gearing level of the group, which will strengthen the financial position of the group,” Country Garden said.

More Asset Disposals

The shotgun share sale to Kingboard comes after cash-strapped Country Garden announced last Friday that it would sell its 26.67 percent stake in a Guangzhou joint venture to its JV partner, state-backed China Overseas Land & Investment, for RMB 1.29 billion ($180 million).

The venture has been developing a mixed commercial and residential complex called Guangzhou Asian Games City. The proceeds from the stake disposal are intended to be mainly applied as project construction expenses to help the group deliver properties, said Country Garden, which expects to realise a gain on the disposal before taxation of RMB 500 million.

The developer chaired by Yang Huiyan seems headed for a full-scale restructuring after revealing this month that “significant uncertainties” exist regarding the settlement of onshore bonds with an issued amount in excess of RMB 14.6 billion ($2 billion).

The lion’s share of the debt is from a Shanghai-listed RMB 5.83 billion bond with a remaining balance of more than RMB 3.9 billion that comes due on 2 September. Bloomberg reported Tuesday that Country Garden has proposed a grace period of 40 calendar days for the maturing bond as it seeks to win creditor support to stretch payment into 2026.

The Foshan-based company already missed $22.5 million in interest payments on a pair of offshore bonds earlier this month. There is a 30-day grace period for those obligations, but the developer has $397 million in offshore bonds maturing this year, plus $1 billion in USD notes due on 27 January.

Back in the Frame

For Kingboard, the transaction with Country Garden marks one of its very occasional appearances on the global real estate scene.

The manufacturer led by Paul Cheung struck a deal last year to buy 2 London Wall Place, a central London commercial building, from Canadian investment giant Brookfield for £293.6 million ($360 million), snapping a four-and-a-half-year pause in UK acquisitions.

Kingboard had last made a splash in London with the purchase of KPMG’s Canary Wharf headquarters for nearly £400 million ($533 million) in a sale-leaseback deal announced in December 2017. That transaction came just over a year after the Hong Kong group bought Moor Place, the European headquarters of WeWork, for £271 million ($331 million).