China’s Country Garden gets liquidation petition from creditor

China’s Country Garden Holdings said Wednesday it received a liquidation petition filed by one of its creditors, deepening worries about the country’s beleaguered property sector.

The troubled property developer said in a regulatory filing it received a “winding-up” petition dated Feb. 27 filed by creditor Ever Credit Limited.

The petition was issued for the non-payment of a loan worth 1.6 billion Hong Kong dollars ($204.4 million).

Country Garden said it will oppose the petition “vigorously” and seek legal measures to do so. A court hearing will be held May 17.

Hong Kong-listed shares of the company tumbled more than 12%, far more than the 0.27% decline in the broader Hang Seng index.

Country Garden said it intends to “proactively communicate” and work with its offshore creditors on its restructuring plan. It noted it does not expect the petition to have a substantive impact on its offshore restructuring process.

The debt-laden property developer’s update comes as authorities struggle to boost the confidence in the real estate market.

The International Monetary Fund said earlier this month that demand for new housing in China is set to drop by around 50% over the next decade.

In late January, property giant China Evergrande was ordered by a Hong Kong court to liquidate, which renewed concerns about China’s struggling real estate sector. Still, it seems worries about a spillover have abated as Evergrande’s issues appear contained.

China’s property sector has historically been the bedrock of the country’s economy, accounting for a large share of gross domestic product. The industry grew rapidly over the last few decades, fueled by debt. But those debt piles have weighed on balance sheets, leading to defaults for major developers.

Companies like Country Garden and Evergrande have struggled to repay their debt obligations and are now embroiled in drawn-out debt restructuring processes.