China Evergrande scraps creditor meetings in risk to US$20 billion debt restructuring as homes sales sag, lawsuits snowball

China Evergrande Group, struggling under US$327 billion of liabilities, has surprisingly scrapped creditor meetings scheduled for next week as home sales sagged and lawsuits snowballed, dragging bondholders back to the drawing board in the country’s biggest corporate restructuring.

The developer cancelled four meetings for two classes of its creditors in Hong Kong and the Cayman Islands set for September 26, according to an exchange filing late on Friday. Two meetings on September 25 for another group of bondholders in Hong Kong and the British Virgin Islands were also halted.

The company will make further announcements when there is an update in respect of amendment to the restructuring terms, it added. The meetings were previously adjourned by almost a month from late August, after the Shenzhen-based developer of fallen billionaire Hui Ka-yan fielded more questions from offshore creditors about the state of its business and financials.

10:57

Boom, bust and borrow: Has China’s housing market tanked?

“The sales of the group have not been as expected,” it said. “Based on the current situation and consultations with its advisers and creditors, the company considers it necessary to reassess the terms of the proposed restructuring to meet the objective situation and the demand of the creditors.”

Evergrande is seeking to reorganise US$20 billion of defaulted debt and claims in the largest ongoing workout by a Chinese company. The developer, which had 2.4 trillion yuan (US$327 billion) in total liabilities on June 30, offered new bonds, convertible debt and stakes in its property management and car-making units to appease creditors.

How Hui Ka-yan plans to rescue Evergrande from China’s corporate graveyard

While Evergrande did not provide the latest sales figures, recent updates from other indebted peers suggest China’s housing market continues to falter this quarter. Sales at Country Garden Holdings and Sunac China Holdings shrank since June, their filings showed, despite state-driven measures to spur home purchases.

Hui Ka-yan, the chairman and founder of Evergrande, seen during the 18th Session of the Communist Party’s 12th Standing Committee meeting. Photo: Handout

Money managers said while Beijing is easing mortgages rules and financing costs, its policy actions have done little to address the credit crunch in the US$2.6 trillion domestic housing market. Since kicking off its industry-crippling “three red lines” rules in August 2020, the nation’s biggest private developers have succumbed as home sales tanked, cash flows dwindled and creditors balked.

Amid the debt workout, Evergrande has continued to attract hostile creditors and authorities. Some 164 cases in July were filed against its unit Hengda Real Estate Group involving 12.6 billion yuan of debt, and 55 cases to freeze 44.7 billion yuan of its assets, according to an August 30 stock exchange filing.

03:11

China real estate woes: Evergrande files for bankruptcy protection in New York

Earlier this month, authorities in Shenzhen detained several executives from its wealth management unit. Evergrande said the “imposition of criminal coercive measures” against its personnel will not affect its operations.

Under its restructuring timetable, Evergrande aims to lock creditors into full agreement by October 1 and conclude the process by December 15. The company last month filed for Chapter 15 protection in the US Bankruptcy Court to give its workout a global effect and recognition.

Based in its late-April filing, Evergrande said creditors holding 77 per cent of US$14.2 billion of class A debt have acceded to its restructuring terms, exceeding the required 75 per cent threshold, while investors holding 91 per cent of US$5.23 billion bonds issued by its unit Scenic Journey have also consented.

It was still short of the threshold in two other classes of debt. Holders of class C claims related to US$13 billion of those obligations, delivered only 30 per cent support, it said. Only 64 per cent acceded in another set of claim against a Hong Kong unit that guaranteed some of the bonds.

South China Morning Post