China Evergrande extends deadline for debt restructuring incentive to May 18

EMBATTLED property developer China Evergrande Group said on Thursday (Apr 27) it would extend the deadline for receiving an incentive for its debt restructuring proposal to May 18 as the company disclosed levels of support from offshore debt-holders for its proposal.

Evergrande said that 77 per cent holders of class-A debts and 30 per cent holders of class-C debts have submitted their respective support for the restructuring proposal, among others.

Creditors would receive a 0.25 per cent consent fee based on the outstanding principal of their debts by way of new notes if they agreed to support the restructuring by Thursday at 0900 GMT – a deadline that has now been extended by the company to 5 pm Hong Kong time (5 pm Singapore time) on May 18.

The deadline to sign to receive an incentive gave an early signal of the level of creditor backing for a vote on the restructuring expected later this year that requires approval from more than 75 per cent in creditor value in each debt class to pass.

Evergrande, the world’s most indebted property developer with US$300 billion of total liabilities, has been at the centre of a debt crisis that has seen multiple Chinese developers default over the past year and seek to restructure debt.

While some major creditors have already agreed to support the restructuring proposal, others are eager to cut ties with the debt-laden company and move on.

The company’s offshore US dollar bonds are trading at 6.8 cents to 7.2 cents on the dollar, according to Duration Finance, versus the recovery rate of 2.1 per cent to 9.3 per cent forecast in liquidation scenario that Evergrande cited in its restructuring proposal.

With little hope of substantial debt recovery or other alternatives in sight, three smaller Evergrande creditors and one private banker representing some told Reuters they were not impressed by the proposed terms, which they said were complex and unattractive.

In Evergrande’s near 200-page debt restructuring term sheets announced last month, creditors were offered the option of swapping all of their holdings into new notes with maturities of 10 to 12 years, or converting them into different combinations of new notes with tenors of five to nine years and equity-linked instruments.

SEE ALSO

China Evergrande debt restructuring incentive to test creditor appetite

A resolution for holders of an 8.2 billion yuan (S$1.6 billion) onshore bond to approve the offshore restructure did not pass on Wednesday because fewer than half of the bondholders turned up to vote.

The chance of blocking the offshore debt restructuring deal, however, was low because the company had secured support from major bondholders, and dissenters accounted for a relatively small proportion of voting power, said Brandon Gale, head of the Asia financial restructuring group at Evergrande’s adviser Houlihan Lokey.

An ad-hoc group representing more than 20 per cent and 35 cent of major holders by value of US dollar-denominated senior notes issued by China Evergrande and unit Scenery Journey said early this month that they would back the restructuring.

Some smaller creditors, speaking on condition of anonymity, told Reuters they found the deal terms unappealing.

One European institutional investor said his firm planned to sell the bonds soon because it had little interest in holding the bonds for another three years before receiving any cash repayment, according to the terms, and he had low expectations that the developer could turn around the business.

A Chinese institutional investor said the restructuring terms were unappealing but his firm planned to accept the offer because its holding was small and it could not see a better option to quickly wrap up dealings and move on.

Houlihan Lokey’s Gale said the restructuring terms were more complex than other property sector deals because Evergrande had “a lot of voices and a fragmented holder base”. REUTERS