On Wednesday, Country Garden announced it would repay some of its debt by issuing about 34 million U.S. dollars worth of new shares, a move aimed at addressing the debt restructuring issue amidst a capital shortfall.
Country Garden stated it plans to issue 350.6 million new shares at a price of 0.77 Hong Kong dollars per share, totaling 270 million Hong Kong dollars in value. These new shares will be directly allocated to Ever Credit Ltd, a subsidiary of Kingboard Holdings Ltd (HK:0148), to repay part of a term loan totaling 1.88 billion Hong Kong dollars.
The purpose of issuing new shares is to reduce the company's capital outflows and improve its debt-to-equity ratio. However, the issuance price of the new shares will be 15% lower than Tuesday's closing price. Although Country Garden is a constituent stock of the Hang Seng Index, which rose 1.2%, it did not stop Country Garden's share price from dropping 3% in Hong Kong's early trading.
This issuance plan comes at a time when Country Garden is facing a worsening cash shortage. Hindered by a slowdown in the real estate market affecting sales and new projects, the company anticipates a substantial loss in the results for the first half of 2023, to be announced on Wednesday.
Following the failure to pay interest on some debts on time in August, Country Garden is striving to ensure sufficient funds to meet its debt obligations. Meanwhile, debt restructuring negotiations with creditors have not proceeded smoothly, intensifying market concerns about the company's potential defaults.
Despite concerns about potential defaults causing Country Garden's stock price to fall to a historical low, it has shown a significant rebound in the past week or two. This improvement is attributed to the company's proactive self-help measures and the impact of successive real estate policies and stimulus measures, among other factors.
Country Garden also stated that, in addition to actively taking various measures to address its debt issues, its 100 billion US dollar project in Malaysia is still proceeding smoothly.
