China's property crisis just keeps getting worse — property giant Country Garden just warned it may default on its debt

• China's Country Garden warned on Tuesday it could default on its offshore debt payments.
• It said in a filing it did not make a due payment in the principal amount of HK$470 million, or $60 million.

China's property crisis just seems to be spiraling.

On Tuesday, embattled property giant Country Garden signaled that it may be facing its first default ever, in a filing to the Hong Kong Stock Exchange.

The real-estate developer said it did not pay a 470 million Hong Kong dollars or $60 million principal payment. The company expects it will not meet all payment obligations outside China when due or within the relevant grace periods.

The real-estate developer has $11 billion of outstanding offshore bonds, per Bloomberg.

Developments at Country Garden are closely watched. The company — which had almost $200 billion in liabilities at the end of 2022 — is the latest high-profile Chinese real-estate giant to face a liquidity crunch in two years as China's economy struggles to recover following the COVID-19 pandemic.

The country's real-estate sector has been mired in a crisis since 2021 when Evergrande — once China's second-largest developer — ran into a liquidity crisis. It first defaulted on an offshore dollar bond in December of that year.

Other Chinese real-estate developers ran into similar issues and began defaulting on their bond payments, spurring fears the crisis could spill over to other sectors in the country and globally.

Country Garden's liabilities are well below Evergrande's $300 billion liability pile. However, Country Garden has around 3,000 unfinished projects — which is around four times that of Evergrande's 800 projects that are still being built.

On Tuesday, Country Garden further said that missing the offshore payments may lead to the company's creditors demanding acceleration of payment of the relevant debts owed — or they may even pursue an enforcement action.

The company is facing "significant uncertainty regarding asset disposals, and its liquidity position is expected to remain very tight in the short- to medium-term," per the filing.

While the company warned about not paying its offshore debt, onshore bondholders have agreed to extend the payment dates of nine series of bonds with an outstanding principal value of 14.7 billion Chinese yuan, or $2.1 billion, per the filing. The extension provided the company "with the time and space to focus on the recovery of its business operations," per the filing.

Country Garden already missed interest payments on two dollar bonds last month, but the company has a 30-day grace period to pay up before it's considered to be in official default.

It has appointed advisers like Houlihan Lokey, China International Capital Corporation, and law firm Sidley Austin to help advise on its capital structure and liquidity position.

Country Garden shares were down 9.5% at 76 Hong Kong cents at 3.34 p.m. local time. The stock is nearly 70% lower this year.

Country Garden did not immediately respond to a request for comment from Insider.