China Evergrande Group, the beleaguered property giant ensnared in a massive debt crisis, is in the process of amending terms of its previously proposed $20 billion offshore debt restructuring deal. The move comes in response to evolving circumstances for the firm and the demands of its creditors, according to a disclosure on Friday.
This adjustment follows shortly after revelations that the company's restructuring proposal did not meet the necessary regulatory prerequisites. This disclosure, which alarmed bondholders, stoked concerns regarding potential liquidation of the property behemoth. Adding to the complexities of the situation, last month, Evergrande declared its founder is under investigation for unspecified offenses, further stymieing their efforts to issue new debt, a key measure in the restructuring process.
This week's announcements underscore the intensifying challenges faced by Evergrande, which has been the focal point of China's property sector debt predicament. "The company is revising the terms of the proposed restructuring to meet [its] objective situation and the demands of the creditors," Evergrande stated in its filing. However, the specifics of the adjustments or a projected timeline for its completion were not provided.
Subsequent to this announcement, the property developer confirmed that previously scheduled court hearings in Hong Kong, meant to sanction the debt restructuring deal with offshore creditors, have been canceled. Concurrently, hearings in other overseas jurisdictions, including an anticipated October 25 hearing in New York regarding its Chapter 15 bankruptcy protection, have been deferred.
Evergrande's decision to backtrack from its previous agreements with creditors has been attributed to several factors, including underwhelming home sales and the sudden detainment of its founder and chairman, Hui Ka-yan, by Chinese authorities.
External advisors were brought in by Evergrande in September 2021 to navigate its burgeoning debt situation. Since their engagement, the company's total liabilities surged by approximately 20%, standing at 2.4 trillion yuan (equivalent to $327 billion) as of June 2023.
Evergrande's inability to uphold its obligations in late 2021 sparked the most significant debt reorganization endeavor in China's history, a process which remains underway amidst a protracted housing market downturn. Offshore creditors are currently attempting to reclaim roughly $20 billion in debt and claims against the developer.
In the wake of this ongoing turmoil, Evergrande's stock experienced a precipitous drop, plunging 10% this week to HK$0.265. This downturn marks an 84% decline for the year, wiping out HK$225 billion in market value since 2021's peak, prior to the liquidity crisis escalation.
Adding to the real estate giant's growing list of challenges, Top Shine Global, a creditor, is slated to advance a winding-up petition on October 30. This move seeks the liquidation of Evergrande due to the developer's failure to recoup HK$862.5 million (approximately $110.3 million) from a compromised investment plan last year.
With these evolving dynamics, the trajectory for Evergrande remains uncertain as the company grapples with its debt challenges amidst a broader industry downturn.