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The logo of Chinese developer Country Garden, in Tianjin, China, on Aug. 18.TINGSHU WANG/Reuters

Country Garden bondholders are seeking urgent talks with the troubled property developer after it missed a $15-million coupon repayment, putting it at risk of default, according to three sources with direct knowledge of the matter.

Two bondholder groups have emerged seeking discussions about a potential debt restructuring package, with a major one close to appointing either Moelis or PJT as financial advisers, said the sources, who declined to be identified because the information is confidential.

That group holds about $2-billion of the debt-laden Chinese property developer’s offshore bonds, one the sources said, and consists of international and fund manager investors.

PJT, Moelis and Country Garden declined to comment.

Ratings agency Moody’s said on Thursday it could downgrade Country Garden’s ‘corporate family rating’ if the recovery prospects for its creditors weaken further.

Moody’s said Country Garden’s senior unsecured rating of C was already at the lowest of its rating scale.

Country Garden’s Australian subsidiary is on the verge of closing a US$250-million sale, off-loading an undeveloped housing plot in Melbourne to Singapore’s Frasers Property, according to a person close to the deal who declined to be identified as they were not authorized to speak to media.

Country Garden and Frasers did not immediately respond for a request for comment on that sale. The deal was first reported by the Australian Financial Review.

Country Garden on Wednesday was due to pay a US$15-million coupon payment on a bond due September, 2025, when a 30-day grace period ended, but two bondholders told Reuters they were yet to receive it.

Non-payment would put the developer at risk of default on its nearly US$11-billion of outstanding offshore bonds and could trigger one of China’s biggest corporate debt restructurings.

The company has not commented on whether it made the payment. On Wednesday, it said it was unlikely to be able to meet most of its upcoming offshore debt payments.

Country Garden has appointed Houlihan Lokey, China International Capital Corporation (CICC) and law firm Sidley Austin as advisers to examine its capital structure and liquidity position and formulate a “holistic” solution.

“The focus now is on how Country Garden’s debt restructuring will proceed from here,” said CreditSights, who noted its dollar bond prices have already priced in expectations of an imminent restructuring, adding the road to restructuring is likely to be “long and bumpy.”

Country Garden’s bonds were bid at 4.39 to 5.33 cents on the dollar on Thursday, according to data by Duration Finance, indicating investors have little confidence in the company’s near-term future.

Approval of restructuring plan could provide room for the developer to dispose assets and maintain operation, which could be helpful in stabilizing the market in the medium term, HSBC said in a report.

Country Garden said on Thursday its founder Yeung Kwok Keung and chairperson Yang Huiyan, his daughter, are at work as usual, according to the official WeChat account, denying online reports of the pair leaving the country.

Founder Mr. Yeung quit Country Garden’s board in March and daughter Ms. Yang became chairperson. Mr. Yeung remains a special adviser.

Mr. Yeung was shown in photos receiving chairman of state-owned China National Agricultural Development Group (CNADC) in the company headquarters in Shunde, Guangdong province, on Tuesday, according to a separate company post late on Wednesday.

CNADC chairman Cao Jianglin was cited as saying Country Garden is “a corporate with responsibility and devotion to the country,” in a rare visit and remark by SOE official regarding a troubled developer.

Country Garden’s missed payment comes on the heels of an investigation into the chairman of beleaguered peer China Evergrande, which has defaulted and has been at the centre of the sector’s debt crisis.

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