HONG KONG (Reuters) -Embattled Chinese property developer Country Garden ( CTRYF ) said it was unable to pay two onshore coupons due on Thursday, but China Bond Insurance Co would do so on its behalf if it missed paying within a grace period that ends next week.

Such a move would be the first time the state-owned company has come to the rescue of an issuer under a Beijing-led programme launched in 2022 to bolster investor confidence, and analysts warned it could make future issuance harder.

Country Garden ( CTRYF ), which defaulted on its $11 billion of offshore bonds and extended other onshore bond repayments late last year, said in a filing it was unable to pay onshore coupons due on Thursday, though it was still trying to raise funds.

"Due to reasons including sales recovery lagging expectations, difficulties of reallocating capitals, we are unable to pay the coupons on time," the developer said.

But it aimed to make the payment and additional interest incurred by May 13, within the grace period of five working days, it added.

In August 2022, Chinese regulators told the state-owned company, a provider of financial guarantee services, to give guarantees for onshore bond issuance by a few selected private property developers, Country Garden ( CTRYF ) among them.

The directive came as concerns mounted that a deepening debt crisis and increasing defaults could impact companies that had been regarded as financially sound.

As part of the programme, China Bond Insurance Co will provide "full amount, unconditional and irrevocable joint liability guarantee" to the medium-term notes, bond documents showed.

If Country Garden ( CTRYF ) still failed to pay the coupons by the end of a grace period, the state-owned company would undertake the credit enhancement obligations as a guarantor, the developer added.

China Bond Insurance Co did not immediately respond to a request for comment.

The coupons totalling 65.95 million yuan ($9.1 million) due on Thursday are tied to two medium-term notes guaranteed by China Bond Insurance Co and issued in May last year, a few months before Country Garden ( CTRYF ) defaulted on its offshore bonds.

They have an outstanding 800 million yuan and 900 million yuan, respectively.

After last year's default, Country Garden ( CTRYF ) managed to pay coupons in December for two other state-guaranteed bonds.

Analysts said the market is confident that the state-owned company would help to make payments under the guarantee programme, but were sceptical about the prospects of more new issuance.

"Regulators had been trying to tell investors they did not have to worry with this programme, but this will not work anymore; companies still keep defaulting," said Steven Leung, director of UOB Kay Hian.

"Regulators will need to come up with new methods to help new issuance."

($1=7.2248 Chinese yuan renminbi)