China Evergrande Inks Deal with Offshore Creditors, Say It’s Confident Restructuring Will Avert Liquidation

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Beleaguered estate giant China Evergrande Group has signed an agreement for the restructuring of its copious offshore debt burden.

On March 22nd, China Evergrande announced that it has signed the main terms of a restructuring plan with a group of overseas creditors.

Under the agreement, Evergrande will issue new bonds to replace the original bonds, with a maturity of 4 to 12 years and an annual interest rate of 2% to 7.5%, as well as an interest exemption for the first three years. From the beginning of the fourth year, 0.5% of principal will be paid in addition to the interest.

Evergrande said it was confident that the signing of the main provision of the offshore debt restructuring plan means will lead to a successful restructuring, and eliminate the risk of liquidation as ordered by the Hong Kong court.

According to a report Viewpoint New Media, China Evergrande has made progress with some of the major holders of the following projects: US dollar senior secured notes with a total principal amount of USD$13.9225 billion issued by China Evergrande; and US dollar senior notes with a total principal amount of USD$5.226 billion issued by J.P. Morgan Securities (Asia Pacific) Limited and guaranteed by Tianji Holdings Limited (天基控股有限公司).

China Evergrande said that these discussions have ultimately led to a binding agreement with members of the existing bondholders’ special group on the core terms of the proposed restructuring. China Evergrande expects the restructuring agreement to take effect from October 1, with an estimated recovery of approximately 9.73 billion yuan for overseas unsecured creditors.

Evergrande still wants to guarantee property delivery

China Evergrande said that its core task over the next three years will be to “guarantee delivery” of properties, as well as striving to maintain orderly operations and resume production.

To this end, the real estate company expects that additional financing of 250 to 300 billion yuan will be required, while Evergrande has indicated that its ability to pay unsecured debt at the company level remains weak.

The existing unleveraged free cash flow of the company’s projects during this period will mainly be used to repay the additional financing required for the continuation of construction projects.

In 2022, the group delivered approximately 301,000 housing units. As of the end of February 2023, the group had completed the “guarantee delivery” task, delivering 421,000 units and 48.82 million square meters of construction area that involved 515 projects.

During January to February 2023, the group achieved contracted sales of approximately RMB 6.57 billion (approximately 4.75 billion yuan after deducting the property payments transferred to construction units or suppliers), with a contracted sales area of approximately 911,000 square meters.