Evergrande aims to unveil debt restructuring in six months’ time after bond defaults as creditors begin to lose patience

·3 min read

Embattled China Evergrande Group has promised investors and creditors that it will roll out a debt restructuring plan in the next six months.

The world’s most indebted developer with 1.97 trillion yuan (US$310 billion) of liabilities “will continue to listen carefully to the opinions and suggestions of the creditors” and will formulate a preliminary restructuring plan, it said in a filing to Hong Kong stock exchange late on Wednesday, after a call with investors.

The Chinese real estate firm stressed during the call that it will treat all bondholders, onshore and offshore, equally, according to people familiar with the matter.

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The call was arranged after Evergrande urged offshore creditors on Tuesday to give it more time to evaluate some potential solutions. A group of investors holding its dollar-denominated bonds threatened to take legal action against the developer based on concerns about asset dissipation, saying they must be consulted before any sale.

Evergrande has been trying to offload its assets, including its 26-storey China Evergrande Centre headquarters in Hong Kong and dozens of projects on the mainland since last year when the company’s debt repayment issues started to mount.

So far, the company has not had any success in divesting its assets.

Evergrande’s liabilities include some US$186.1 million in offshore bond payments due this month, US$2 billion in March and US$1.045 billion in April.

Fitch and S&P Global Ratings declared the developer in default after it failed to pay interest on its bonds in December.

But relief is in sight for Evergrande. The central government recently encouraged state-owned companies to acquire projects from cash-strapped developers to help ease the severe liquidity stress in the sector that has the potential to threaten financial and social stability.

In a bid to encourage M&As, the debt raised by a developer to acquire distressed assets of another home builder when calculating their compliance with the “three red lines” debt threshold has been excluded.

China’s financial regulators met the country’s major distressed asset management companies (AMCs) to discuss developers’ asset disposals, the China Securities Journal reported on Thursday.

“They are experienced in disposing of soured assets, as well as project mergers and acquisitions, and their participation can help dissolve risks in China’s struggling property sector,” the state-owned newspaper said, without naming the companies that were summoned by the regulators.

China has four big AMCs – China Huarong Asset Management, China Orient Asset Management, China Cinda Asset Management and China Great Wall Asset Management – that were set up to deal with non-performing loans of major state banks.

Evergrande’s shares closed 3.4 per cent lower at HK$1.71, clawing back some of their 6.8 per cent loss earlier. Hong Kong’s benchmark Hang Seng stock index fell 2 per cent while the Hang Seng Mainland Properties Index declined 2.6 per cent.

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