Country Garden's Debt Troubles: What are its Projects in Indonesia?

China's major property company, Country Garden Holdings, is grappling with a debt crisis.

According to its financial reports, at the end of 2022, Country Garden's total debt reached RMB 1.43 trillion, or approximately Rp3 quadrillion (assuming an exchange rate of Rp2,094 per RMB). This debt represents 82% of its total assets.

Amidst this massive debt, in early August 2023, Country Garden defaulted on a US$22.5 million bond coupon payment, equivalent to approximately Rp343.2 billion (assuming an exchange rate of Rp15,253 per USD).

This issue raises concerns, given Country Garden's size and operations in numerous countries, including Indonesia.

"We see a high risk of contagion (from Country Garden's debt problems), not only to other business sectors but also impacting the broader economy," said Soo Chong Lim, an analyst at JPMorgan Chase & Co., as reported by Yahoo Finance on Monday, August 14, 2023.

Based on its financial reports, until the end of 2022, Country Garden had under-development property projects totaling RMB 912.2 billion, or approximately Rp1.9 quadrillion.

The majority of these under-development properties are located in China, with a total project value of RMB 899.3 billion, or approximately Rp1.88 quadrillion.

Country Garden's under-development projects in Indonesia amount to RMB 1.8 billion, or approximately Rp3.8 trillion.

The report does not detail these Indonesian projects. However, Google searches indicate Country Garden's involvement in the development of Sky House BSD+ and Sky House Alam Sutera+ apartments in Tangerang, Banten.

According to its website and social media accounts, as of August 2023, the Sky House BSD+ Kensington Tower is still under construction, with scheduled handover in 2025. The Sky House Alam Sutera+ Castilla Tower was still under foundation construction as of January 2023. No official updates on the progress of these projects have been released by the company.

In early August 2023, Country Garden also issued a profit warning, stating that the company's performance deteriorated in the first half of the year.

"Based on current estimates and other available data, the group expects a net loss for the first half of 2023 to range from RMB 45 billion to RMB 55 billion, a reversal from the net profit of RMB 1.91 billion in the first half of 2022," Country Garden's management stated in its release.

They attributed this projected net loss primarily to the decline in real estate sales, decreased gross profit, devaluation of property projects, and losses due to foreign exchange fluctuations.

"Since 2021, the industry has entered an unprecedented difficult period, and various unfavorable factors have occurred, resulting in the industry facing severe difficulties and challenges," they stated.