Eliza Wong
A Precipitous Financial Position
Country Garden Holdings (02777.HK), once a towering figure in China’s real estate sector, now faces a staggering financial challenge. With merely 6.88 billion yuan ($988 million) in cash and cash equivalents against 122 billion yuan ($17.2 billion) in outstanding domestic bonds, the property giant has unveiled a comprehensive restructuring plan that could set a precedent for other struggling developers. The announcement came on September 10, 2025, revealing the depth of the company’s financial distress and its innovative approach to resolving its debt obligations.
The company’s stock price has plummeted to HK$0.72, leaving it with a market capitalization of just HK$2.7 billion ($346 million). This dramatic fall from grace highlights the severe pressures facing China’s property sector, which has been grappling with tightened regulations, declining sales, and liquidity crises since 2020. Country Garden’s restructuring plan represents one of the most complex debt resolution attempts in the industry to date.
Industry analysts are closely watching this development, as it may establish new patterns for how financially distressed Chinese property companies handle their obligations to bondholders. The plan’s multi-option approach reflects the company’s attempt to balance creditor recovery with operational survival in an increasingly challenging market environment.
Six-Pronged Debt Resolution Strategy
Country Garden’s domestic debt restructuring plan offers bondholders six distinct options for settling their claims, providing unprecedented flexibility in how creditors can approach recovery. This menu-based approach represents a significant evolution from the simple maturity extensions that characterized earlier property sector restructurings.
Cash Buyback Option
The cash repurchase program allows bondholders to sell their bonds back to the company at a substantial discount. Country Garden proposes to buy back bonds in three separate tranches, offering only 20% of the remaining face value for each bond. The total amount allocated for this option is capped at 6 billion yuan ($861 million).
The first buyback window will open within five months after the bondholders’ meeting, with payment following within three months of registration. Funding for these repurchases will come from multiple sources including large asset disposals, hotel property sales, government land buybacks, and third-party financing. Subsequent buyback windows will follow a similar pattern, with the company committing to additional cash repurchases if more funding becomes available within 18 months.
Asset-for-Debt Swaps
In what may prove to be the most substantial component of the restructuring, Country Garden is offering physical assets to settle debt obligations. Bondholders can exchange 100 yuan of bond face value for 30 yuan worth of real assets, primarily consisting of the company’s property inventory and development projects.
The total value of assets available under this option is limited to 66 billion yuan ($9.5 billion) in outstanding principal. This approach allows the company to reduce its debt burden while simultaneously disposing of inventory that might otherwise be difficult to sell in the current market conditions. The assets offered likely include completed residential units, commercial properties, and development land parcels across Country Garden’s portfolio.
Receivables Trust Program
Perhaps the most innovative aspect of the restructuring is the receivables trust scheme. Country Garden plans to establish a trust with 3 billion yuan ($431 million) in accounts receivable as underlying assets. Bondholders can exchange 100 yuan of bond face value for 30 yuan worth of trust units.
The trust is expected to have a lifespan of up to 60 months, during which it will collect on the receivables and distribute proceeds to unit holders. These receivables primarily originate from government entities and related-party projects, which while potentially more reliable than commercial receivables, may still face collection challenges given the current economic environment.
This marks the first time such a structure has been formally incorporated into a major Chinese property developer’s public debt restructuring toolbox. As noted by industry expert Gao Chengyuan, CEO of Tiaoyuan Consulting, this approach offers legal simplicity and avoids the complications of equity conversion in a declining stock market, though it carries the risk of uncertain cash flows from the underlying government and related-party receivables.
Asset Trust Program
Similar to the receivables trust but with different underlying assets, the asset trust option allows bondholders to exchange debt for shares in a trust holding property income rights. The exchange rate is slightly more favorable at 35 yuan of trust units for every 100 yuan of bond face value.
This option is capped at 57 billion yuan ($8.2 billion) in outstanding principal. The trust will hold rights to income generated from Country Garden’s investment properties and other income-producing assets, providing bondholders with potential long-term cash flow rather than immediate recovery.
Stock Economic Rights Settlement
For bondholders willing to take equity risk, Country Garden proposes a stock-based settlement through a special purpose trust. The company plans to conduct a private placement of up to 200 million shares in Hong Kong, with the proceeds used to compensate bondholders who select this option.
The foreign currency raised from the share placement will be converted to domestic currency for distribution to participating bondholders. This approach provides the company with a mechanism to reduce debt without immediate cash outlay, while giving bondholders potential upside if the company’s share price recovers.
Extended Maturity Option
The final option available to bondholders is a straightforward maturity extension for any remaining bonds after the other options have been implemented. These bonds would be extended to September 16, 2035, with principal repayments beginning in March 2031.
The extended bonds would pay semi-annual principal installments of 1 yuan per bond, with full remaining principal and interest due at maturity. The interest rate would be reduced to a flat 1% for both past due interest and the extended period, calculated on a simple interest basis without compounding.
Deteriorating Financial Metrics
Country Garden’s precarious financial position has been developing over several years. The company reported a net loss of approximately 4.082 billion yuan ($586 million) for the first half of 2025, representing a 75.12% widening from the 2.331 billion yuan ($335 million) loss recorded during the same period in 2024.
The company’s financial statements reveal a troubling picture: total assets of 289.149 billion yuan ($41.5 billion), with development properties accounting for 120.738 billion yuan ($17.3 billion) or 41.75% of the total. Meanwhile, total liabilities have climbed to 264.379 billion yuan ($38 billion), an increase of approximately 2.243 billion yuan ($322 million) from the end of the previous year.
Most alarming is the cash position: including restricted amounts, Country Garden holds only 35.07 billion yuan ($5 billion) in total cash, with just 6.88 billion yuan ($988 million) in unrestricted cash and equivalents. This represents an extremely tight liquidity position given the company’s massive debt obligations and ongoing operational requirements.
Historical Context and Failed Turnaround Attempts
Country Garden’s current predicament did not emerge overnight. The company began implementing various measures to address cash flow pressures as early as 2019, including asset sales, equity financing, and reduced land acquisition. Despite these efforts, the company has been unable to stem its financial deterioration.
The Chinese property market’s extended downturn, exacerbated by government policies aimed at deleveraging the sector and the broader economic challenges facing the country, has created a perfect storm for highly leveraged developers like Country Garden. Even previously successful strategies such as presales of development projects have become less effective as buyer confidence has waned.
Industry Implications and Expert Analysis
The restructuring plan proposed by Country Garden represents a significant evolution in how distressed Chinese property developers are addressing their debt challenges. According to Gao Chengyuan, this menu-based approach moves beyond the one-size-fits-all maturity extensions that characterized earlier restructuring attempts in the sector.
Gao notes several emerging trends in property sector restructurings: increased cash requirements, larger discounts on physical asset exchanges, extended timelines often exceeding ten years, and interest rates converging toward 1-2%. Country Garden’s plan incorporates all these elements, potentially establishing a template for other mid-sized and smaller developers facing similar challenges.
The expert further observes that the viability of restructuring options depends heavily on the nature of a developer’s assets. Companies with valuable land bank in first- and second-tier cities and significant commercial holdings have more flexibility to structure asset-based debt solutions. Those relying primarily on residential inventory face greater challenges, as completed units in less desirable locations may have limited appeal to creditors.
The New Competitive Landscape
Gao suggests that the property sector’s next phase will reward companies that can most effectively convert paper inventory into alternative forms of value that creditors will accept. Survival will depend less on company size and more on the speed and effectiveness with which viable restructuring plans can be implemented.
This represents a fundamental shift in the industry’s competitive dynamics. Previously, scale provided advantages in terms of financing access, land acquisition, and market presence. In the current environment, agility and the ability to negotiate favorable restructuring terms may prove more valuable than sheer size.
The Path Forward for Country Garden and the Sector
Country Garden’s proposed restructuring represents a critical test case for the Chinese property sector’s ability to address its debt overhang. The success or failure of this comprehensive approach will likely influence how other distressed developers and their creditors approach negotiations.
The company’s ability to implement the various components of the plan will depend on several factors: the acceptance rate among bondholders for the different options, the market reception to asset sales, the performance of the trust structures, and overall conditions in the Chinese property market. External factors such as government policy changes and broader economic trends will also play significant roles.
For the sector as a whole, Country Garden’s experience may accelerate the differentiation between developers who can successfully navigate the current challenges and those who cannot. Companies with stronger balance sheets, more desirable assets, and better management may emerge from the crisis with enhanced competitive positions, while weaker players may be forced into more drastic restructuring or exit the market entirely.
Key Takeaways and Next Steps
Country Garden’s debt restructuring proposal offers a sophisticated, multi-option approach to addressing its 122 billion yuan ($17.2 billion) in domestic bond obligations. The plan provides something for various types of creditors, from those seeking immediate partial recovery through cash buybacks to those willing to wait for potentially better returns through trust structures or extended maturities.
The company’s extremely limited cash position of just 6.88 billion yuan ($988 million) makes a comprehensive restructuring essential rather than optional. The proposed menu of solutions acknowledges both the company’s constraints and the varied preferences of its diverse creditor base.
As the restructuring process moves forward, stakeholders should monitor several key indicators: bondholder acceptance rates for the different options, progress on asset sales, performance of the trust structures, and any changes to the company’s operational strategy. The broader implications for China’s property sector and the potential adoption of similar approaches by other distressed developers also warrant close attention.
For investors and analysts following Chinese property, Country Garden’s restructuring represents a critical case study in crisis management and debt resolution. The outcome will provide valuable insights into the viability of complex restructuring approaches and the potential recovery values available in one of the world’s most challenging property markets.
To stay updated on this developing story and its implications for the broader property sector, follow our continued coverage of Chinese real estate and corporate restructuring trends. Understanding these complex financial maneuvers is essential for anyone with exposure to China’s property market or interest in corporate turnaround situations.
