Will Country Garden Collapse with their Debt Load?

TheBigFatWhale wrote a column · Sep 27, 2023 20:12

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Will Country Garden Collapse with their Debt Load?

Recent headlines from major publications such as Reuters, Bloomberg, CNA etc., have painted a bleak outlook for Country Garden.

It seems to point that they would likely default on their debt which could potentially lead to a collapse of the whole company. ‌

Country Garden was the largest real estate company in terms of sales in China last year. They generate 96% of their cashflows from real estate sales.

Headline numbers put them in debt of 196 billion US Dollars (1.4 trillion RMB). There have been also delays in the payment of interest on bonds and postponing the repayment of a key loan. ‌

With the slowing of China's economy coupled with inflationary pressure on construction costs, it has been a tough time for China developers.

Country Garden is also not in the most ideal target segment, 60% of their property projects are located in 3rd to 4th-tier cities.

This is the segment where prices have fallen the most and the target buyers have low purchasing power. ‌

We decided to have a look at their financials to have a better sense of the situation.