China property crisis worsens, country Garden sees its bonds slump

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China property crisis worsens, country Garden sees its bonds slump

Country Garden's logo is seen on a building in Dalian.

SHANGHAI LONDON Reuters -- China's biggest homebuilder by sales, Country Garden, saw its bonds slump on Monday as the country's property crisis showed no signs of letting up.

Last week was the worst on record for Country Garden's bonds and new drops of up to 17 points on Monday, leaving most of its international market debt at 25 -- 35 percent less than its face value.

Reports that it had dropped plans to raise $300 million last week after debt market investors showed insufficient appetite, according to analysts.

A spokesman for Country Garden said the company had no plans to sell a convertible bond at present.

Seaport Global analyst Himanshu Porwal said it just seems to be the fear factor playing out. People are marking things down as much as they can. Country Garden's share price fell 8% in Hong Kong, though it wasn't the only one to see sharp falls.

Central China Real Estate, Yuzhou Group Holdings, KWG Group Holdings and Jingrui Holdings all fell sharply on, falling as much as 20.3%.

Chinese developers are facing an unprecedented liquidity squeeze due to years of regulatory curbs on borrowing, leading to a string of debt defaults, credit-rating downgrades and sell-offs in developers' shares and bonds.

A severe and prolonged downturn in China's real estate sector will have significant economy-wide repercussions, as developers' total liabilities amount to almost 30% of the country's GDP, according to the World Bank's economic prospects report last week.

Colm D'Rosario, a debt manager at Europe's biggest asset manager Amundi, said that it has turned into a cash crunch in the sector.

Many of China's big developers still have large debt payments this year, at a time when traditional borrowing markets are largely closed to them.

The government will take steps at some point because they don't want a downward spiral, but they are walking a tightrope, D'Rosario said.