(Yicai) May 30 -- Country Garden Holdings has hit a snag in efforts to restructure its offshore debt, after the Chinese builder failed to reach agreement with its ad hoc bondholders group over how to pay compensation of USD178 million to a group of banks, The Paper reported yesterday, citing a source familiar with the matter.

Seven lenders, including long-time business partners Bank of China and the Industrial and Commercial Bank of China, hold 48 percent of Country Garden’s outstanding syndicated loans.

Country Garden and a steering committee formed by the banks previously agreed that the builder would pay USD178 million as part repayment of a loan they provided in 2023, with half to be paid in cash on the restructuring’s effective date and the rest via a two-year secured loan. The committee also received USD500 million worth of collateral from the Foshan-based firm in 2023.

But the ad hoc group, which represents holders of notes and convertible bonds, has objected to this agreement, after disagreeing with the compensation arrangement and questioning the collateral transferred to the banks.

The group believes the transfer was unreasonable, especially given that Country Garden -- once China’s biggest builder -- was already teetering on the brink of default, the source said. They argue that the unsecured offshore assets were supposed to be shared equally among all creditors and not to a few banks, and that this constitutes preferential treatment for certain creditors.

The group contends that paying cash to release the collateral now would deplete the firm's offshore cash reserves and harm the interests of US dollar bondholders, according to the source.

Disagreements over the collateral held by the bank syndicate have been a sticking point in discussions over the offshore debt restructuring since as early as November 2024.

Editor: Kim Taylor