Defaulted Chinese developer Country Garden Holdings is looking to dispose of a stake in chip company ChangXin Memory Technologies (CXMT) via its venture capital arm, as it struggles to pare assets and work out its debts amid slumping home sales. The company also received seven weeks of breathing room on a liquidation hearing in a Hong Kong court.

Country Garden Venture Capital, an investment unit of Country Garden that was founded in 2019, is planning to dispose of its undisclosed stake in CXMT, according to people familiar with this matter, who did not disclose further details.

Country Garden Venture Capital holds a 1.68 per cent stake in CXMT, according to Chinese corporate data service Qichacha. In late March, CXMT raised 10.8 billion yuan (US$1.5 billion) in a round of fundraising, pushing its valuation close to 140 billion yuan.

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Once the biggest developer in China, Country Garden has been struggling with a liquidity crisis since last October when it defaulted on a dollar-denominated bond, forcing offshore creditors into talks to reorganise their debts. It also faces a winding-up petition in Hong Kong due to non-repayment of a HK$1.6 billion (US$205 million) loan plus accrued interest.

The stake disposal is part of the developer's strategy to optimise its asset-liability structure, including evaluation of its portfolio and potential asset disposal, according to an employee with knowledge of the matter.

The cash-strapped developer reported on Tuesday that its contracted sales for May slumped 76 per cent year on year to 4.3 billion yuan, adding to a year-on-year decline of 83 per cent in April.

However, its May sales increased 11.4 per cent compared with April, after Beijing launched a historic rescue package to shore up the battered real estate segment.

Hong Kong's High Court on Wednesday ordered a further adjournment of the liquidation petition, shifting a hearing to July 29 from June 11, according to an exchange filing on Thursday.

Country Garden had 1.36 trillion yuan in total liabilities on June 30, 2023, according to its latest published accounts. This included 258 billion yuan of bonds and bank borrowings.

The developer did not file its annual 2023 report by April 30 under Hong Kong stock exchange listing rules.

CXMT launched a memory chip of the type used in AI applications in December. Photo: CXMT alt=CXMT launched a memory chip of the type used in AI applications in December. Photo: CXMT>