China Evergrande Group extended by three weeks a deadline for debtholders to receive compensation for backing the embattled developer’s restructuring plan, as the firm has yet to win enough support for the massive overhaul.
(Bloomberg) — China Evergrande Group extended by three weeks a deadline for debtholders to receive compensation for backing the embattled developer’s restructuring plan, as the firm has yet to win enough support for the massive overhaul.
Creditors holding more than 30% of a class of debt including margin loans and repurchase obligations have acceded to a restructuring support agreement, Evergrande said in a statement to the Hong Kong exchange Thursday. That’s short of the 75% it would need from each group of creditors to implement the restructuring through so-called schemes of arrangement, as Evergrande has said it expects to do.
That bloc of creditors is known as Class C, which Evergrande has previously estimated account for nearly $15 billion of claims. The other major group is Class A, which accounts for $17 billion of claims and includes an ad-hoc group of bondholders that had already agreed to the restructuring plan weeks ago. Evergrande also said Thursday that more than 77% of the Class A creditors have acceded to a restructuring support agreement.
The consent deadline for creditors to receive compensation for acceding to an RSA has been extended to May 18.
Evergrande’s tumble into distress the past two years set off contagion in what’s shrunken to a $142 billion market for high-yield property dollar bonds in China. As liquidity across the sector tightened, the fallout in 2022 included record defaults and a new-home sales slump.
The company released its long-awaited debt proposal in March, 15 months after first missing payments on public dollar notes. Potential hurdles to the plan quickly emerged with law firm White & Case LLP holding a call to invite Evergrande Class C creditors to form a committee and ask for more time to consider the proposals, among other demands.
Meanwhile, some investors and analysts expressed doubts about proposed recoveries, and the company’s dollar-bond prices fell amid broader market weakness.
The company disclosed earlier this month that holders of more than 20% and 35% of outstanding dollar bonds respectively issued by Evergrande and unit Scenery Journey Ltd. backed the debt offers. Those investors included Redwood Capital Management and Saba Capital Management, according to people with knowledge of the matter.
The developer’s restructuring also involves separate schemes for Scenery Journey and fellow offshore unit Tianji Holding Ltd. Evergrande said Thursday that holders of more than 91% of Scenery Journey bonds have acceded to an RSA, along with those holding more than 64% of debt instruments from Tianji.
Evergrande expects to implement its debt restructuring through schemes of arrangement in the Cayman Islands, Hong Kong and/or other jurisdictions. A Hong Kong scheme requires 75% in value of participating creditors and a majority in number of each class to vote in favor of the scheme, according to law firm DLA Piper LLP.
A successful debt restructuring is key to Evergrande’s fight against an investor’s court effort to potentially liquidate the firm, with the next hearing scheduled for July. Getting the case withdrawn or dismissed is among the things needed for shares of Evergrande and two listed units to resume trading.
–With assistance from Emma Dong, Erin Hudson and Dorothy Ma.
(Updates throughout.)
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