China Evergrande Group said it’s clinched an offshore restructuring deal with a key creditor group, laying a cornerstone in the property developer’s debt-overhaul road.
(Bloomberg) — China Evergrande Group said it’s clinched an offshore restructuring deal with a key creditor group, laying a cornerstone in the property developer’s debt-overhaul road.
Members of an ad-hoc group of investors holding Evergrande offshore notes signed three restructuring support agreements, according to a Hong Kong stock exchange filing late Monday. The plan allows bondholders to receive new notes or a combination of new debt and instruments tied to shares of subsidiaries.
While Evergrande hailed the restructuring plan as a “substantial milestone,” the world’s most indebted developer will have to win over more creditors for the overhaul to proceed. Bondholders are also awaiting the release of financial results for the past two years to assess the financial state of the group, including its property management and electric vehicle units.
The debt restructuring for Evergrande, the developer central to China’s property crisis, is one the country’s largest ever and carries broad implications for its financial system. The proposal also serves as a reference point for other defaulted Chinese builders working to revamp their leverage loads.
The ad-hoc group represents holders of more than 20% and 35% of aggregate outstanding principal amount of existing notes issued by Evergrande and its unit Scenery Journey Ltd., respectively. Creditors will receive a consent fee for 0.25% of outstanding principal of the respective debts if they agree to the proposal by 5 p.m. Hong Kong time on April 27.
Evergrande expects to implement its debt restructuring through so-called schemes of arrangement in the Cayman Islands, Hong Kong and/or other jurisdictions. Under such court-overseen processes, approval of at least 75% of creditors in value are needed for debt overhauls to proceed.
The following is a timeline of upcoming events and procedural targets:
Trading in shares of Evergrande will remain suspended until further notice, the company said. The Hong Kong-listed shares haven’t traded since March 2022. Once halts reach 18 months, exchange rules say a firm’s listing can be canceled.
The company’s 2021 financial statements were held back as unit Evergrande Property Services Group Ltd. disclosed 13.4 billion yuan ($1.9 billion) of its deposits were used as security for pledge guarantees and seized by banks.
The developer released its debt proposal 15 months after the firm’s first public bond default. It allows bondholders to receive new notes maturing in 10 to 12 years or a combination of new debt and instruments tied to shares of Evergrande’s property-services unit, its electric-vehicle division or the builder itself. The firm also set a December deadline for the debt restructuring plan to take effect.
Evergrande had earlier said it expected to enter one or more restructuring support agreements with the bondholder group by the end of March, progress that led to the adjournment of a winding-up court hearing to July 31.
Dollar bonds sold by China Evergrande and unit Scenery Journey barely moved Tuesday morning and were traded at around 8 cents and 9 cents on the dollar, respectively.
–With assistance from Felix Tam.
(Updates with details of bondholder group in fifth paragraph, chart and table)
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