(Bloomberg) -- Will a missed dollar bond interest payment by distressed Chinese developer Country Garden Holdings Co. trigger credit default swaps tied to its debt?
That question has been posed to the Credit Derivatives Determinations Committees, according to a notice posted Monday. The industry bodies deliberate on such queries involving potential payout on CDS, which can be used by creditors to insure against default by borrowers.
A panel of banks and investment managers was asked by an eligible market participant if a failure-to-pay event had occurred after the company skipped an interest payment due Sept. 17 on its 6.15% dollar bonds. A 30-day grace period on the $15.4 million interest payment expired last week, and a default—which would be Country Garden's first—can be called after that.
China's former top builder has remained silent after saying in a statement to Bloomberg News last week that it doesn't expect to meet all of its offshore payments on time, citing China's home market weakness and subdued sales. The company added that it hopes to seek a “holistic solution” to its debt problems.
Chinese developers have suffered record defaults as a property debt crisis heads into its fourth year. Other builders have had their CDS contracts triggered. Among those are Sino-Ocean Group Holding Ltd., a state-linked developer that suspended payment on all offshore borrowings in September after the CDS panel said it had ruled a missed dollar debt payment was a failure-to-pay credit event. Last year, Logan Group Co. faced a similar outcome.
With $186 billion of total liabilities, Country Garden is one of the world's most indebted builders, and has come to symbolize China's broader property woes. Creditors are now examining whether the the latest payment failure would trigger a cross-default on other debt, and when the company will deliver a restructuring blueprint.
The prices on Country Garden's debt, at just pennies on the dollar, underscore how little creditors expect to claw back in any eventual restructuring. The 6.15% note due in 2025, for example, was last indicated at about 5 cents.
--With assistance from Alice Huang.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.