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Country Garden default on the 9th of Av

In this weblog I stated that August 6, 2023 was the 9th of Av. It actually begins the evening of July 26 and ends at sundown on July 27. I apologize for the mistake. I was going by what someone else wrote and failed to check it out for myself.

https://www.hebcal.com/holidays/tisha-bav-2023

The history of the 9^th of Av, of course, is accurate, as is the financial event in China on August 6.

Begin weblog:

According to Jewish tradition in the Talmud, the 9^th of Av on the Hebrew calendar was a day of mourning and fasting to commemorate the destruction of Solomon’s temple in 586 B.C. and also Herod’s temple in 70 A.D. 2 Kings 25:8 says that Solomon’s temple was destroyed on “the seventh day of the fifth month” (Av), but the Talmud says that this was when the walls of the city were breached.

Jeremiah 52:12, 13 says that the temple was destroyed on “the tenth day of the fifth month” (Av), the same day that the temple was destroyed in 70 A.D., according to Josephus (Wars of the Jews, 6:249-250), but the rabbis afterward settled on the 9^th of Av, saying that this was when most of the destruction took place (Ta’an 29a).

Other Jewish calamities occurred on the same date in later years, so this has become a prominent day of mourning and fasting among the Jews.

The 9^th of Av in 2023 fell on August 6, so I was watching to see if something might occur then. I had already been watching for a so-called “black swan event” in mid-August, according to the word of the Lord. On this day Country Garden, “the biggest privately owned developer in China,” defaulted on $22.5 million worth of coupons (payments on bonds).

https://www.reuters.com/markets/asia/chinas-country-garden-missed-two-dollar-bond-coupon-payments-2023-08-08/

HONG KONG, Aug 8 (Reuters) - Country Garden (2007.HK) said on Tuesday it has not paid two dollar bond coupons due on Aug. 6 totalling $22.5 million, confirming market fears that the biggest privately owned developer in China is slipping into repayment troubles.

The bonds in question are notes due in Feb 2026 and Aug 2030, the firm told Reuters. Both payments have 30-day grace periods, according to investors citing prospectuses.

It is apparent that $22.5 million is a relatively small amount for a big company such as this. Yet Country Garden did not have sufficient cash to pay it to the bondholders. That suggests a serious shortage of liquidity. Another headline read:

The real-estate empire helmed by one of China’s richest women is weeks away from a $199 billion collapse that could dwarf Evergrande

https://fortune.com/2023/08/09/country-garden-default-china-real-estate-developer-bigger-than-evergrande/

Another article (by Bloomberg) says this:

Formerly the nation’s largest private-sector developer by sales, the builder of more than 3,000 housing projects in smaller cities is a household name and employed about 70,000 people at the end of last year. That status had given it the firepower to withstand an industry cash crunch that led to record defaults since Evergrande first missed bond payments in 2021. But tumbling industry home sales and soaring refinancing costs are threatening that streak.

“Any default would impact China’s housing market more than Evergrande’s collapse as Country Garden has four times as many projects,” Bloomberg Intelligence analyst Kristy Hung wrote in a report Wednesday. “Any debt crisis at Country Garden will have a far-reaching impact on China’s housing market sentiment and could significantly weaken buyer confidence on solvent private developers.”

https://finance.yahoo.com/news/country-garden-shows-even-china-035653352.html

A Country Garden default would have an immediate impact on all the bondholders, mostly banks and hedge funds from any part of the world. We have yet to see who might be affected by this default. But since the company has a 30-day grace period, the affects will probably not be felt fully until September.