Evergrande misses deadline for $300bn debt restructuring plan

Evergrande has failed to meet a self-imposed deadline for a proposal to restructure its $300bn in liabilities, adding to uncertainty over the fate of the world’s most indebted real estate developer.

The struggling property business, which was the most prominent default last year in a sector-wide liquidity crisis in China that shook its entire real estate market, said in January that it would publish a “preliminary restructuring proposal” by the end of July.

Last month, it told creditors it was on track to meet the deadline and urged patience amid threats of legal action.

The long-awaited announcement late on Friday evening in Asia outlined the potential use of equity in the company’s offshore subsidiaries, including a property services business and electric vehicles unit, to repay bondholders and said the company had made “positive progress”.

But it did not provide concrete details of how it would restructure its more than $300bn in liabilities, around $20bn of which are held by international investors who have seen their holdings plunge to a fraction of their original value.

A person close to the international bondholders said Evergrande was “nowhere near” a comprehensive restructuring plan.

The lack of detail underscores the drawn-out and opaque process surrounding Evergrande’s restructuring, which is expected to be the largest in China’s history and has deep ramifications for other major developers that defaulted as part of the same crisis.

International bondholders have previously expressed frustration over a lack of engagement from the company and in March some threatened legal action after mystery Evergrande lenders seized $2bn through its property services subsidiary.

Last week, the company’s chief executive and chief financial officer resigned following an investigation into the incident.

Evergrande has previously mooted a draft debt restructuring plan that would rely on staggered payments and debt-to-equity swaps, Reuters has reported. But another person involved in the process said that this had not materialised into a formal proposal because of a lack of approval from its biggest creditors.

A person involved with the proposal said it was likely to be released by the end of October, but only once details were agreed with creditors.

The group first began missing payments on its international bonds in September last year, sparking global concerns over the health of China’s economically critical real estate sector. Other developers, including Kaisa and Fantasia, have also defaulted on their debts as construction across the country ground to a halt last year.

Evergrande’s Hong Kong-listed shares have been suspended from trading since March as it has yet to file its overdue annual accounts.

The company has prioritised the completion of its residential projects across China, where the practice of selling homes before their completion has added to political tensions around its failure. It said on Friday that it had “partially or completely resumed construction” at 96 per cent of pre-sold and undelivered projects.

Evergrande said its electric vehicle unit, which investors have closely watched as a potential asset that could be used in the restructuring, started taking orders for electric SUVs earlier this month despite a delay in delivery. It had received more than 37,000 orders for its signature model as of July 20, it said.

The company this week also put its Hong Kong headquarters up for sale again, following a failed attempt to sell it last year.

Additional reporting by Chan Ho-him and Primrose Riordan in Hong Kong

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