Evergrande offers sweetener for debt revamp as China property crisis worsens

By Clare Jim and Xie Yu

HONG KONG (Reuters) – China Evergrande Group will provide its offshore collectors asset packages which will embody shares in two overseas-listed items as a sweetener, the developer stated on Friday, as a stifling liquidity disaster within the property sector continues.

The 2 listed items are Evergrande Property Companies Group Ltd and electrical car maker China Evergrande New Vitality Automobile Group Ltd, the embattled developer stated in an replace on its preliminary restructuring proposal, a transfer that was broadly anticipated by collectors.

Evergrande’s restructuring proposal, which was skinny in particulars, comes as China’s property sector, a key pillar for the world’s second-largest economic system, lurches from one disaster to a different. The sector has seen a string of debt defaults by cash-squeezed builders.

With greater than $300 billion in liabilities, Evergrande, as soon as China’s top-selling developer has been on the centre of the disaster and its debt restructuring plan is seen as a doable template for others.

An individual accustomed to the restructuring plan individually informed Reuters Evergrande aimed to wrap up group due diligence work subsequent month earlier than beginning negotiations with collectors on particular phrases.

The developer’s aim is to current by November a restructuring plan with extra particulars and which might have key collectors’ approval, stated the particular person, declining to be named as he was not authorised to talk to the media.

Evergrande declined to remark.

On Friday, Evergrande stated within the restructuring replace that the due diligence course of was persevering with, given the group’s dimension and complexity and the “dynamics the group finds itself in”.

It anticipated due diligence work on the group to be accomplished within the close to future, and goals to announce a selected plan in 2022.

The world’s most indebted property developer’s whole $22.7 billion price of offshore debt together with loans and personal bonds is deemed to be in default after lacking cost obligations late final yr.

The developer started talks with offshore collectors concerning the restructuring proposal earlier this yr, after advisers for a bunch of offshore bondholders demanded extra transparency from the developer.

Some bondholders have been left unimpressed by the replace on Friday.

“It’s disappointing however form of anticipated… There’s nothing they may provide as a result of everyone knows the corporate is just about a zombie now,” stated one onshore Evergrande bondholder.

The bondholder stated he had been following developments associated to the offshore restructuring to get clues on what Evergrande may do with its onshore debt. He declined to be named as he was not authorised to talk to the media.

RESUMING WORK

Final week, the developer stated a preliminary probe discovered 13.4 billion yuan ($1.99 billion) in deposits in Evergrande Property Companies have been used as collateral for pledge ensures to facilitate financing by the group and seized by banks.

The seized quantity might wipe out a lot of the money the unit was holding, analysts had stated.

Evergrande is pushing forward with the disposal of its Hong Kong headquarters by way of a tendering course of that ended this week, one other supply stated. The sale proceeds of the Hong Kong tower could be used to repay offshore collectors.

In its Friday assertion, Evergrande anticipated it could take a comparatively very long time for the enterprise to revive orderly operations and asset worth for all stakeholders, because of the state of the true property markets in China and the general dimension of the corporate’s belongings and liabilities.

It posted contracted gross sales of 12.3 billion yuan within the first six months, in comparison with 356.8 billion yuan a yr in the past, and resumed development of 96% of its pre-sold and undelivered initiatives.

In a separate assertion on the corporate web site, Evergrande stated firm gross sales have “regularly restored” since March as homebuyers regained some confidence after it assured dwelling supply.

It has additionally acquired new financing of two.57 billion yuan ($381.12 million) within the first half of the yr.

Evergrande stated it reduce administration workers at its headquarters by 67% to 712 folks and on the native challenge degree by 54% to 776 folks to chop prices.

China’s economic system, of which the property sector accounts for 1 / 4, solely narrowly missed a contraction within the second quarter. A rising revolt by homebuyers this month who’re threatening to cease paying mortgages on unfinished initiatives, has additional clouded the outlook for the sector.

Evergrande stated it was making its “greatest effort” to renew work and development and the group had “partially or utterly resumed” development of 96% of its pre-sold and undelivered initiatives.

($1 = 6.7433 Chinese language yuan renminbi)

(Reporting by Clare Jim, Xie Yu, Sameer Manekar; Enhancing by Sumeet Chatterjee, Elaine Hardcastle and Deepa Babington)