Examining the Dramatic Wealth Reversal and Ongoing Challenges Faced by Yang Huiyan and Country Garden
Yang Huiyan, the 41-year-old chairman of Country Garden, has experienced a staggering $25 billion decline in her wealth over the past two years. This decline comes as Country Garden’s shares have hit an all-time low due to diminishing profits and a mounting debt crisis. Despite this setback, Yang still possesses a net worth of $4.6 billion, marking a significant reversal of fortune from when she became the world’s youngest female billionaire in 2007 at the age of 26.
The source of Yang’s wealth, which peaked at $29.6 billion in 2021, primarily stems from her 57% ownership stake in Country Garden. The company’s shares have faced a substantial decrease in value this week, triggered by news that the property developer failed to make interest payments of $22.5 million on two U.S. dollar bonds.
While Country Garden currently has a 30-day grace period to address the missed payments due on August 6, preparations for an eventual debt restructuring are already underway, as reported by local news outlet Yicai. Although a spokesperson from Country Garden declined to comment on the report, an earlier statement to Forbes highlighted the decline in usable cash due to falling sales, shifts in the refinancing landscape, and the influence of various fund regulations.
Nicholas Chen, an analyst at research firm CreditSights based in Singapore, states, “Country Garden’s ability to pay remains very uncertain at this point.” He emphasizes that even a ‘high-quality’ developer like Country Garden can encounter challenges, similar to its industry peers.
Formerly considered a prominent player in China’s real estate sector, Country Garden had set itself apart by consistently meeting its debt obligations. However, the company now faces mounting pressure to overcome the debt crisis. Yang is tasked with finding sufficient funds to repay debts, including approximately $4.3 billion in onshore and offshore bonds set to mature in 2024. Among these bonds are those that investors can demand payment from Country Garden.
Recent developments indicate growing concerns, with one offshore bond maturing in January 2024 plunging to less than 10 cents on the dollar, indicating investor expectations of an imminent default. Moody’s Investors Services downgraded Country Garden by three notches, citing factors such as worsening liquidity and escalating refinancing risks.
In a stock exchange filing on a late Thursday, the company disclosed an anticipated net loss of up to $7.7 billion for the first half of 2023, in stark contrast to the $265.7 million profit generated during the same period the previous year. The filing attributed these challenges to a challenging period for the industry since 2021, characterized by adverse factors impacting sales and open market financing.
Country Garden’s struggles extend further as it canceled a planned $300 million share sale recently. Jeff Zhang, an analyst at Morningstar, suggests that concerns about the company’s share price, which has more than halved this year, and mounting liquidity issues led to this decision. Notably, shares were previously sold at a significant discount to market price during last year’s fundraise through the same channel.
The company’s difficulties are exacerbated by the fact that the majority of its projects by market value are located in lower-tier cities, where property prices lack resilience due to China’s wider economic weakness and deflation signs. Contracted sales have experienced substantial declines, with an estimated one-third drop to $18 billion in the first half of the year and a subsequent 60% decline to $1.7 billion in July, according to Moody’s.
With missed coupon payments further impacting market confidence and funding access, Country Garden’s survival strategy remains a topic of discussion. The company has received limited funding streams recently, including financing from Flow Capital and Chong Hing Bank. While there is uncertainty, industry experts note the potential for government and state-influenced bank support to determine the company’s fate.
As the heiress to her father’s legacy, Yang Huiyan, armed with her marketing and logistics degree from Ohio State University, is now in the spotlight. She faces the challenge of steering the business in a shifting landscape, with her sister Yang Ziying and husband Chen Chong also playing key roles.
Country Garden’s strategy to expand its landbank in tier-1 and tier-2 cities is highlighted as a potential solution. However, analysts caution that this endeavor is complex, given the competition with powerful state-run rivals and the existing weakened state of Country Garden. With challenges on multiple fronts, including sales improvement and capital market access, Country Garden’s future hinges on navigating these complexities and overcoming its present obstacles.