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Debt-ridden Chinese property giant Evergrande plans to restructure nearly $23 billion of its offshore debt as the company aims to resume operations and solve its onshore issues. Meanwhile, the company’s shares on the Hong Kong Stock Exchange will remain suspended until further notice.
“The proposed restructuring complies with international restructuring norms and best practices,” Evergrande said in a stock exchange filing. Once China’s leading property developer, the company currently has $300 billion in liabilities. Evergrande defaulted on its liabilities in late 2021.
The company said it would “use its best endeavors to restore a healthy ecosystem of capital and business, repair its capital structure and stabilize its business operations.”
Last week, the company said several key offshore bondholders agreed to the plan. According to the proposal, creditors will exchange Evergrande bonds for new bonds and equity-linked investments backed by Evergrande and two of its Hong Kong-listed subsidiaries.
The company aims to get approval from the remaining bondholders by the end of the month for restructuring that begins in October.
Troubles Stem From a $300 Billion Debt
Evergrande aggressively expanded its operations and was heavily financed by debt. However, China introduced new rules for real estate developers in 2020, including acceptable debt levels.
Evergrande was forced to offer properties at significant discounts to ensure the required liquidity levels and keep the business afloat. However, in December 2021, Evergrande failed to meet a payment deadline and repay interest on around $1.2bn of international loans.
As a result, the company was declared in default by major credit rating agencies.
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