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HONG KONG: The grace period for Country Garden Holding’s $15 million coupon payment has expired, fuelling expectations that China’s biggest private property developer had defaulted on its offshore debt.

One bondholder of the tranche, who declined to be identified discussing confidential information, said he had not received payment on the coupon as the grace period ended.

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

A missed payment on a September 2025 bond without a deal with creditors would mean that Country Garden has joined scores of other Chinese developers who have defaulted, deepening the crisis roiling the property sector, which makes up about a quarter of the world’s second largest economy.

The company last week warned of its inability to meet offshore debt obligations, saying that included “within the relevant grace periods” and adding non-payment may lead to creditors demanding payment acceleration or pursuing enforcement action.

With nearly $11 billion of offshore bonds, a default by Country Garden would set the stage for one of China’s biggest corporate debt restructurings.

Country Garden has also missed other offshore payments in the past few weeks, though those payments still have not seen their 30-day grace periods lapse.

The company is, however, in better shape with its onshore debt, having gained some breathing room with payment extensions.

Last month it won approval from creditors to extend repayment on an onshore bond, the last in the batch of eight bonds it had been seeking extensions for, sources have said.

The eight bonds worth 10.8 billion yuan ($1.48 billion) have each been extended by three years.

Country Garden gets maturity extension approval for one more onshore bond

A CreditSights report published on Tuesday found China’s state-linked developers could still access funding markets while the private firms were struggling to source new capital.

“With homebuyers still biased towards state-linked developers, those privately-run developers still not yet in a default would likely find staying afloat an increasingly challenging prospect, squeezed by both insufficient contracted sales generation and funding inaccessibility,” the report said.

A default would open the way for Country Garden’s offshore creditors to begin negotiations with the firm’s financial advisors.

A restructuring process could take many months given the scale of the debt.

China’s bleak property market outlook is likely to worsen the terms that offshore creditors may have to accept as debt is restructured.

Data on Wednesday showed property investment in China slid 9.1% for the first nine months of the year. Sales by floor area dropped 7.5%.

Nationwide prices of new homes for September will be released on Thursday.

Developers accounting for 40% of Chinese home sales have defaulted on their debt obligations since 2021, according to JPMorgan.

Those companies, mostly private, have issued around $110 billion worth of high-yield offshore bonds.

Hong Kong’s Hang Seng Mainland Properties Index is down 40% so far this year.

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