China’s Country Garden warns of default risks, posts $10.5 billion loss

The news: Troubled Chinese property developer Country Garden has warned of default risks if its financial performance continues to deteriorate, after posting a record first-half loss.

The numbers: It posted a net loss of 48.9 billion yuan ($10.5 billion) for the six months to 30 June, versus a 612 million yuan net profit in the first half of 2022. Revenue rose 40% from a year earlier but its cost of sales surged 73%. It has total interest-bearing debts of $55.5 billion, of which $23.4 billion are due within 12 months.

The context: Country Garden, China's largest private property developer, missed two dollar-coupon payments and sought to extend another private bond repayment earlier this month. It has been in talks with banks and other creditors to restructure debt, amid a slowdown in China’s property market, with growing fears that problems could spread to other parts of the country's economy. Rival Evergrande recently sought Chapter 15 protection to shield its US assets while its own restructuring arrangements are worked out.

What they said: "If the financial performance of the group continues to deteriorate in the future, the group might not be able to fulfil the financial covenants of these borrowings, which may result in default in these borrowings and cross-default in certain other borrowings," the developer said in a filing.