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Country Garden has two offshore bond coupons due and unpaid, involving $22.5 million and the company’s operating cash outflow and the upcoming bond maturity are quite large in scale, with 20 billion yuan of bonds expected to mature in Sept – Dec, making its liquidity condition challenging, UBS said in a note.
UBS reiterated its Sell rating on Country Garden with a target price of HK$1.2.
UBS is concerned about the potential negative spillover effects of a bond restructuring, which would undermine buyers’ confidence in private developers’ ability to complete projects on schedule, affect financial institutions and suppliers’ attitude towards private developers, and have a negative impact on its non-listed project partners.
Property sales in China’s lower-tier cities are expected to deteriorate further, and refinancing for private and semi-SOE developers to become more challenging and it will be more difficult to drive demand for properties in lower-tier cities, given the measures already put in place to stimulate the property market, UBS said.