Embattle property developer China Evergrande Group said it would not conduct the scheme meeting scheduled on Sept. 25 and Sept. 26 as it considers it necessary to reassess the terms of the proposed restructuring.
Evergrande on March 22 announced plans for the restructuring of its $22.7 billion in offshore debt. “Since then, the company’s sales have been weaker than expected,” it said in a filing.
“Based on the company’s current situation and consultations with its advisors and creditors, the company considers it necessary to reassess the terms of the proposed restructuring to meet the company’s objective situation and the demand of the creditors,” it said in a filing.
Evergrande needs approval from more than 75% of the holders of each debt class to approve the plan, which offers creditors a basket of options to swap debt for new bonds and equity-linked instruments backed by its stocks and those of its Hong Kong-listed units.
China Evergrande and its financial advisors will continue to proceed with offshore debt restructuring, but they need to renegotiate some key terms with overseas creditors, said a person closed the company’s debt restructuring business.
If China Evergrande drafts new terms for the restructuring plan, they need to resign restructuring support agreements with overseas creditors and the second round of restructuring will see great difficulties, said a Hong Kong-based lawyer familiar with overseas debt restructuring business.
The company’s offshore debt restructuring has been through ups and downs. On December 3, 2021, Evergrande failed to fulfil obligations associated with a $260 million private bond, triggering cross default. In January 2022, Evergrande repeated said that it would bring up a debt restructuring plan by the end of July 2022 but the plan was delayed by eights months.
In March this year, Evergrande unveiled a multi-billion dollar restructuring plan with its international creditors. It offered two main options for its international creditors. They can swap their holdings into new notes with a 10 – 12 year maturity or convert them into different combinations of new notes with a five to nine year maturity and equity-linked instruments.
Evergrande had said at the time that it would focus on returning to normal operations in the next three years. That will require additional financing of 250 billion to 300 billion yuan ($36.4 billion to $43.7 billion) to resume work and ensure delivery of properties.
Earlier this month, Shenzhen police detained some staff at China Evergrande’s wealth management unit, suggesting a new investigation that could add to the property company’s woes.
“Recently, public security organs took criminal compulsory measures against Du and other suspected criminals at Evergrande Financial Wealth Management Co,” police in the southern city of Shenzhen said.
The wealth unit was an indirect wholly owned subsidiary, and the imposition of criminal coercive measures on the staff members was in accordance with the law which would not affect the company’s operations, Evergrande said in a filing to the Hong Kong Stock Exchange.
According to its financial report, by the end of June 2023, Evergrande had 13.38 billion yuan of cash and equivalents, down from 14.31 billion yuan at the end of 2022, and of the amount, unlimited cash stood at 4.047 billion yuan.