Investor abandons exercise of put options related to 146.5 billion won bonds
It has been reported that Biguiyuan (Country Garden), known as the epicenter of China’s real estate crisis, has overcome the crisis of being the first yuan-denominated bond default in the region.
On the 12th (local time), CNBC, etc., citing a well-informed source, said, “There was a put option (early redemption right) until the 13th regarding the 800 million yuan (approximately 146.5 billion won) Biguiyuan regional bond, but most investors decided not to use the put option. “I did it,” he said.
If an investor exercises a put option, the issuing company must return the investment principal. The company avoided a default crisis as Biguiyuan investors decided not to use the option. However, uncertainty surrounding Biguiyuan’s liquidity crisis still remains.
Previously, Biguiyuan failed to pay $15.4 million (about 20.8 billion won) in interest on dollar bonds due in 2025 that was due by September 17. It failed to repay even by October 18, when the 30-day grace period expired, effectively falling into default.
In the midst of this, the company’s management sought self-rescue measures, such as voluntarily reducing wages.
The company announced in a statement on the 12th that four key board members, including Chairman Yang Hui-yan, daughter of founder and former Chairman Yang Guoqiang, and CEO Mobin, proposed voluntary salary cuts. Yang Huiyan’s annual salary was cut from 370,000 yuan to 120,000 yuan, and Mo Bin’s salary was cut from 3 million yuan to 120,000 yuan.
Biguiyuan was once China’s largest real estate developer based on contract sales, but has now fallen to seventh place.
However, it is carrying out about 3,000 real estate projects across China and employs about 70,000 people.
Considering the size of the company, the shock of Biguiyuan’s default is expected to have a greater impact than the 2021 Hengda Group (Evergrande) default.
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.