Country Garden, a prominent Chinese property developer that faced a debt default last year, disclosed that it has received a liquidation petition from a creditor following its failure to repay a loan. The petition was submitted by Ever Credit Limited, the lender of a term loan facility amounting to 1.6 billion Hong Kong dollars ($204.5 million), as stated in a filing to the stock exchange on Wednesday. This development caused shares of the developer to plummet by over 12%, signaling further challenges in the already tumultuous real estate sector.

The news of the liquidation petition adds to the woes of Country Garden, coming just a month after another major property firm, Evergrande, was instructed by a Hong Kong court to undergo liquidation in a landmark ruling. Evergrande’s liquidation order ensued from protracted negotiations with overseas creditors over the restructuring of its massive debt, spanning a staggering 19 months. The fallout from Evergrande’s collapse, once a titan in China’s real estate industry, continues to raise uncertainties concerning the fate of investors, thousands of employees, and homebuyers awaiting property deliveries.

In response to the petition, Country Garden asserted its intention to vigorously contest the liquidation proceedings, which were initiated in Hong Kong’s High Court on Tuesday. A court hearing has been scheduled for May 17, signaling a protracted legal battle ahead.

Last October, Country Garden faced a declaration of default on its debt by a panel of global banks and investors overseeing the credit default swaps market. This declaration followed the company’s failure to meet a bond repayment deadline, amidst mounting liquidity pressures. Formerly the largest homebuilder in China, Country Garden’s financial distress intensified amid a profound decline in sales, prompting warnings to investors regarding potential defaults on offshore debt obligations.

China’s economy has grappled with the ramifications of a real estate downturn since 2021, catalyzed by government interventions aimed at curbing excessive borrowing by developers. The ongoing crisis has seen dozens of major developers defaulting on their debt, exacerbating concerns about the stability of the sector. In response to the persistent challenges, China’s central bank recently implemented a historic reduction in its key mortgage reference rate, intensifying efforts to mitigate the enduring crisis characterized by diminishing investment and sales in the property market.