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Evergrande targets restructuring proposal within six months as state tightens control

Stock MarketsJan 26, 2022 06:56PM ET
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© Reuters. FILE PHOTO: The company logo is seen on the headquarters of China Evergrande Group in Shenzhen, Guangdong province, China September 26, 2021. REUTERS/Aly Song

By Clare Jim and Jason Xue

HONG KONG (Reuters) -China Evergrande Group said on Wednesday it aims to have a preliminary restructuring proposal in place within six months as the debt-laden developer scrambles to reassure creditors spooked by defaults since its finances began to unravel last year.

The long-awaited communication came against the backdrop of Beijing tightening control over the property developer, while taking measures to stabilise China's crisis-hit property sector.

But some bondholders said they were disappointed by the 25-minute call with creditors, which included prepared answers to questions, saying it lacked insight on Evergrande's plans.

"(I had) no expectation prior to the call and no expectation after the call... frankly speaking, I believe the final decision making is led by the government, the company is relatively passive," said one offshore Evergrande bondholder.

The bondholder declined to be named as he was not authorised to speak to the media.

Once China's top developer, Evergrande has racked up debts of more than $300 billion and is struggling to repay creditors, suppliers and investors in wealth management products.

It missed some dollar bond payments last month, sparking calls for talks, and nearly $20 billion of its international bonds are now deemed to be in default.

Evergrande's newly-appointed executive director Siu Shawn, who is also chairman of Evergrande New Energy Vehicle Group Ltd, said on the call with creditors that the group was working on a comprehensive restructuring plan.

Siu said Evergrande aimed to propose the plan within six months, adding the developer also hoped to work with creditors to achieve a risk management solution, a call participant who declined to be named due to confidentiality constraints, said.

Evergrande had on Monday sought more time from its offshore bondholders to work on a debt restructuring plan, after a group of creditors said they were ready to take "all necessary actions" to defend their rights.

"The board of directors and the risk management committee look forward to having further communications with investors and respectfully request (them) not to take any aggressive legal actions in order to maintain stability for the mutual benefits of all stakeholders," Siu said on the call.

In a Hong Kong stock exchange filing shortly after the call, the developer said it would continue to listen carefully to the opinions and suggestions of creditors.

TRANSPARENCY

The company's debt crisis has engulfed other Chinese developers, roiled global financial markets in the past year and contributed to a slump in China's property market, which accounts for a quarter of its economy.

Evergrande had stayed largely silent about the status of its offshore credit since missing payment on dollar bonds for the first time in September. As Beijing tightened its grip, Evergrande has publicly said it planned to engage with offshore creditors.

The developer set up the risk management committee in December with mostly members from state enterprises, as the Guangdong provincial government is leading its restructuring.

On Monday, Evergrande named Liang Senlin https://www.reuters.com/business/shares-china-evergrande-jump-after-report-restructuring-plan-be-released-soon-2022-01-24, chairman of China Cinda (HK) Holdings Company Limited, a unit of China Cinda Asset Management (1359.HK) - one of the country's four biggest state asset managers - as one of its board members.

Advisers for a group of offshore bondholders had demanded more transparency https://www.reuters.com/world/china/chinese-markets-return-break-more-evergrande-angst-2021-10-07 from the developer.

"We noticed there are doubts about the transparency and the restructuring process of the group, we'd like to take this opportunity to explain to all creditors that the board of directors, the risk management committee and the group will work expeditiously to stabilize the group operation," Siu said.

A member of the developer's risk management committee, Chen Yong, also joined the call, the participant added.

Chen is a compliance director of state-owned Guosen Securities. Andrew Huang, Evergrande's Hong Kong branch general manager, was also present, said the participant, declining to be named due to confidentiality constraints.

Responding to offshore creditors' concerns that they would be treated differently from those onshore, Huang said on the call that the company would treat all categories of creditors fairly and follow international practice.

"The call turned out to be disappointing. Not that I was expecting any fireworks, but still some insights on business would have been useful," Himanshu Porwal, an EM credit analyst at Seaport Global, said.

"Six months is a long time for (a) draft restructuring plan."

Evergrande had asked bondholders to disclose their holdings by the middle of this week to identify investors for communications, and hired more financial and legal advisers to follow up on creditor demands.

Shares in Evergrande closed up 1.7% on Wednesday, while its defaulted dollar bond due April 2022 dropped to 15.997 cents on the dollar from 17.074 overnight, Duration Finance data showed.

Rating agency Moody's (NYSE:MCO) said in a report on Wednesday that covenant packages in Evergrande's offshore issuance had become increasingly lax, loosening or eliminating key protections, and putting the recovery prospects for offshore creditors in peril.

Evergrande targets restructuring proposal within six months as state tightens control
 

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