HONG KONG: Property developer China Evergrande Group plans to use domestic assets as sweeteners to win offshore creditor approval for a long-awaited debt-restructuring proposal, two people with knowledge of the matter told Reuters.
Evergrande, engulfed by $300 billion in liabilities, aims to start negotiating restructuring terms next month and is combing through onshore assets to offer as additional credit enhancement to holders of its U.S. dollar-denominated bonds, the people said.
Once China’s top-selling property developer, Evergrande has been at the centre of a deepening property debt crisis that has seen multiple developers default on offshore debt obligations over the past year, leaving many negotiating debt restructuring.
With developers struggling to find funding to finish projects and pay suppliers, the government last week issued financial institutions with a number of directives to ease the liquidity crunch, such as granting loan repayment extensions.
Evergrande’s $22.7 billion worth of offshore debt, including loans and private bonds, is deemed to be in default after missed payment obligations late last year. With few fresh funding options and slowing property sales, Evergrande this year began one of China’s biggest debt-restructuring processes.
Chinese developers including Evergrande – the world’s most indebted – typically have few assets abroad that can be used in offshore debt restructuring. If the plan to use onshore assets materialises and is accepted by offshore bondholders, Evergrande would be the first Chinese developer to use those assets to raise the investment recovery prospects of such creditors.
The goal was to present a proposal with the approval of key creditors by November, a person familiar with the plan told Reuters at the time.
One more challenge is a winding-up petition filed by an investor in June which, if successful, could upend Evergrande’s restructuring plan by diminishing the value of its overseas assets. The developer plans to apply for an adjournment in the next hearing on Nov. 28th, one of the people said.
Source: Reuters
