China's largest real estate company says it may default

Country Garden has defaulted on a HK$470 million ($60 million) debt as of October 10, according to CNBC, which could lead to creditors demanding faster repayment or pursuing enforcement action.

In a filing to the Hong Kong stock exchange on October 10, Country Garden said its sales and finances were facing “significant challenges” and its available capital continued to decline, Reuters news agency added.

According to Country Garden, it will “be unable to meet all of its overseas payment obligations as they fall due or within the relevant grace period.”

Country Garden's warning underscores an unprecedented liquidity squeeze in China's property sector, which accounts for about a quarter of the economy, and weaker sales continue to cloud the outlook for property developers.

Country Garden is China's largest private real estate developer, once considered a healthy real estate business and survived the early stages of China's real estate crisis.

However, in early September, Country Garden stunned global investors when it had to squeeze through a narrow gap to escape bankruptcy.

At that time, Country Garden managed to pay $22.5 million in bond interest and persuaded creditors to vote unanimously to extend the repayment period for six domestic bond lots by three years.

Country Garden has $10.96 billion in foreign bonds and 42.7 billion yuan ($5.86 billion) in foreign loans, according to Reuters.

Next week, Country Garden faces a major test as its entire overseas debt could be considered in default if it fails to pay interest on a $15 million bond due in September and whose 30-day grace period expires on October 17.