(Bloomberg) -- Chinese developer Country Garden Holdings Co. is seeking help from a state-backed program guaranteeing developer bonds to pay interest due Thursday, said people familiar with the matter.

The cash-strapped developer is in talks with China Bond Insurance Co., which guarantees the two notes with coupons falling due as part of a broader program introduced by authorities in 2022 to help private developers ease liquidity crunches. The two coupon payments total 65.95 million yuan ($9.1 million) and are due on May 9. 

The uncertainty over repayments of relatively small amounts of interest underscores Chinese developers’ mounting cash strains, despite a recent flurry of government measures to support the sector. None of the builders that have used the guarantee program have missed payments on the guaranteed securities, making this the first major test.

Country Garden and China Bond Insurance didn’t immediately reply to requests for comment.

The coupon payments are for two securities issued by Country Garden’s key onshore unit with guarantees from China Bond Insurance. One is a 900 million yuan 3.95% bond due in 2025 and the other is an 800 million yuan 3.8% bond due in 2025. If no payments are made by the due date, a grace period of five working days is triggered before default occurs, according to the two bonds’ prospectuses.

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State-owned China Bond Insurance has played an important role in authorities’ efforts to shore up confidence in the real state sector. So far at least 33 bonds have been issued via the program, with 33.7 billion yuan raised in total, according to Bloomberg-compiled data. 

Once China’s largest developer by sales, Country Garden has been hit hard by the property crisis and now is saddled with 1.36 trillion yuan of total liabilities, according to its unaudited 2023 interim results. It has defaulted on offshore dollar notes and is fighting a liquidation petition filed by a creditor in a Hong Kong court. The builder has just won approval to push pack payments on three yuan bonds to avoid local default. 

--With assistance from Emma Dong, Jackie Cai and Shuiyu Jing.

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