The debt-laden developer giant, China Evergrande Group, is expected to release its offshore debt restructuring plan this month. Its bondholders wonder how much money they’ll retrieve after the dust settles.

Evergrande was declared “default” in December 2021, becoming the highest-profile casualty of the property crisis in China.

According to Bloomberg, the default came after Chinese regulators cracked down on excessive real estate debt.

Evergrande, founded in 1996, relied on borrowing to boost its growth. At a time, Evergrande became China’s largest property company by contracted sales. But it is also the largest dollar-debt borrower among Chinese developers.

The company says it owns more than 1,300 projects in 280 cities.

Evergrande had a liquidity problem in 2020. In late 2021, it missed a deadline to pay two dollar-bond coupons.  

As Bloomberg reported, Evergrande had about 1.97 trillion yuan ($283 billion) in liabilities as of June 2021. Nearly half of that figure was bills to suppliers and other payables, while interest-bearing debt totaled 572 billion yuan.

The developer has reduced its net debt-to-equity ratio to below 100%, meeting one of the metrics that the government required to limit borrowing by property companies.

Evergrande had $19.2 billion in offshore dollar bonds outstanding, the most among Chinese developers.

As a result of the broader crisis in China, Evergrande reported its property sales down for the first time in at least a decade in 2021, dropping 39%.

Mired in debt woes, Evergrande is seeking a restructuring plan. It initially promised to release a preliminary plan by the end of July 2022, but later postponed the deadline to the end of this year.

According to Bloomberg, some of Evergrande’s offshore bondholders saw little use in pressing their case in Chinese courts. They cited the government’s heavy involvement: A risk-management committee dominated by state officials is guiding the restructuring.

Some bondholders criticized Evergrande for its lack of engagement at the beginning of their restructuring negotiations.

However, after a creditor filed a lawsuit to wind-up Evergrande in Hong Kong, bondholders secured more influence in June this year. The court asked the developer to show progress in the debt talks to avoid liquidations. It then promised to win major creditors’ support for a debt plan by late Februar y or early March.

Evergrande is now aiming to present a proposal for its dollar debt overhaul by the end of December.

The company said it might use assets outside China to repay creditors, including shares in its electric vehicle and property management services units.

Some creditors have also demanded Evergrande Chairman Hui Ka Yan to offer at least $2 billion in personal wealth as a condition for their agreement to any proposal.

The Chinese government is seen as unlikely to bail out Evergrande because the People’s Bank of China Governor Yi Gang has said the company would be dealt with in a market-oriented way.

But the authorities are now overseeing the case to avoid a disorderly collapse that would cause pain for many other companies and homeowners.

Sign up to receive our latest news!

By submitting this form, I agree to the terms.