According to Reuters, China’s real estate giant Evergrande will release its debt restructuring proposal this week. The plan will not only decide the company’s future but also signal Beijing how to overcome the ongoing real estate crisis in the country.
Evergrande is the world’s most indebted business, with about 300 billion dollars in outstanding debt. Since the debt crisis, the company has struggled to fulfill its financial obligations to creditors, customers, and suppliers.
Many other Chinese developers now expect Evergrande’s restructuring debt plan to take it as a model for the industry to follow.
Investors will also closely watch the Chinese government’s role in the company’s restructuring debt proposal.
Regarding offshore debt, Evergrande started negotiating with its creditors about a restructuring debt proposal earlier this year after bondholders required more transparency from the company.
But some of Evergrande’s offshore creditors told Reuters that the debt restructuring proposal could be delayed since there is still debate over how to repay and reorganize the debt.
The proposal comes at a time when there is no sign of recovery of the real estate market and recent widespread mortgage boycotts from clients on unfinished property projects.
Reuters on July 26 reported that China plans to set up a 44 billion dollar fund as an effort to rescue the sector.
The move arrives as regulators rush to reassure investors’ confidence in the troubled real estate.
But Larry Hu, chief China economist at Macquarie, told Reuters that the fund alone would not solve all the problems.
Last week, the company just fired its CEO and CFO for their involvement in an arrangement that led banks to seize two billion dollars from its key subsidiary.
Like Evergrande, many Chinese real estate developers are now facing payment deadlines for billion-dollar debts, fueling the ongoing debt crisis in the sector.
Caixin Global reported last month that about 200 major Chinese property developers had to pay 26 billion dollars of debts in June and July.
In June, CNBC cited Moody’s, saying it has issued 91 downgrades for high-yield Chinese property developers in the last nine months.