Gold Ease Global, a unit of beleaguered Chinese property developer Country Garden (HK:2007), has sold a 1.79% stake in Zhuhai Wanda Commercial Management Group back to its parent Dalian Wanda Commercial Management Group for 3.07 billion yuan. The proceeds will be used to restructure a part of Country Global’s offshore debt while it records a 160-million-yuan loss on the sale. Country Garden shares rose as much as 3% on the news today.
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Country Garden is the largest private player in China’s real estate markets. The company has been a victim of the current crisis in China’s property market. In October, Country Garden defaulted on roughly $11 billion of offshore bonds, bringing it to the brink of closure. A series of measures by the Chinese government has helped keep the company afloat along with several other struggling Chinese property developers.
Notably, Country Garden shares also received a boost in morning trade today on the news of it repaying 800 million yuan to onshore bondholders, as per a regulatory filing from December 13.
Here’s Why Country Garden Sold Zhuhai Wanda Stake
Zhuhai Wanda was expected to file an initial public offering (IPO) in Hong Kong this year. A failure to do so would result in the buying back of 40-billion-yuan worth of shares by its parent, Dalian Wanda. Meanwhile, Dalian Wanda is attracting more investments from private equity players to complete its IPO requirements. Country Garden’s decision to offload its small stake comes as it sees “significant uncertainty” in Zhuhai Wanda’s IPO plans.
Is Country Garden Holdings a Good Stock to Buy?
Amid the ongoing liquidity crisis and the uncertain fate of the Chinese real estate market, it would be wise to avoid the sector. Although Country Garden is striving to draw more liquidity, it would take a lot of time to clean its balance sheet of all the bad loans. Year-to-date, Country Garden shares have lost 71.4% due to the bond payment issues.
