Dollar bonds of Country Garden (COGARD) fell by over 1.5 points across the curve. While the reason for the drop is not clear, Bloomberg Intelligence (BI) notes that refinancing difficulties amid the three red-lines policy might see the developer’s financials under some pressure. COGARD currently does fall under the limits of the policy. Its Liabilities/Assets (ex-advanced proceeds) ratio is at 38%, Net-debt/Equity is at 42.6% and Short-term Debt/Cash is at 73%. The caps set by the government are: Liabilities/assets (ex-advanced proceeds) not more than 70%, Net-Debt/Equity not more than 100% and Short-term Debt/Cash of lesser than 100%.

However, this may not be enough to rekindle land investment, they note. Besides, after a 28% YoY sales decline in 1Q 2023, the management has stopped short of giving a 2023 sales target. This might lead it to lose its ranking among China’s top three developers by contracted sales. BI notes that COGARD might have relatively few projects available for sales this year, having paused land investment for eight months. 

COGARD’s bonds due 2030 were down 1.5 points to 45-46 cents on the dollar.

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