Evergrande delays restructuring votes; shares down 79% after 17-month halt

CHINA Evergrande Group delayed key votes on its offshore-debt restructuring plan just hours before they were to occur Monday (Aug 28), adding to uncertainty in a protracted process to finalise one of the country’s biggest restructuring ever.

The distressed developer, at the epicentre of a property crisis that’s unleashed record delinquencies in a threat to China’s financial markets, delayed the meetings for the group and some units to Sept 25-26, it said in a filing. 

Evergrande cited a desire to let creditors evaluate recent developments including resumption of trading in its stock, as well as the terms of the proposals.

Shares of China Evergrande tumbled 79 per cent after the world’s most-indebted developer resumed trade after a 17-month halt during which its debt woes rattled global markets and sparked concerns of contagion.

China Evergrande’s stock, which had been suspended since March last year, closed at HK$0.35 (S$0.09), wiping roughly US$2 billion off its market value.

Market capitalisation shrank to HK$4.6 billion (S$795.6 million) from HK$21.8 billion from when it last traded.

“Not enough votes is probably the reason for the delay,” said Ting Meng, a senior credit strategist at Australia & New Zealand Banking Group, adding that it is uncertain whether the meeting will be further delayed later. While resumption of share trading helps creditors gauge value as they think about how to vote, the sharp drop in the stock price has likely given them more concerns, she said.    

Investor patience is running thin. Evergrande shot past previous targets in unveiling its restructuring plan, and global money managers are still seeking clarity on what they might recover some 20 months after the firm’s first public bond default.

The last-minute change Monday is also the second such abrupt delay from a major distressed Chinese developer in just days, after Country Garden Holdings pushed back voting on Friday on its request to extend payment on an onshore bond.

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Evergrande did finally unveil its restructuring plan in March. But in its last update in April, it said that support still fell short from a key group of investors known as Class C creditors that entail nearly US$15 billion of claims. The company didn’t provide any further updates Monday on the support level it’s gathered.

Creditors had been slated to meet Monday evening Beijing time at the offices of law firms Sidley Austin in Hong Kong and Maples & Calder in the British Virgin Islands to cast their votes on the defaulter’s offshore debt restructuring plan.

The company reported a loss attributable to shareholders of US$4.5 billion for the six months ended June 30, according to a filing to the Hong Kong stock exchange Sunday.  

Monday’s delay wasn’t the first time Evergrande has rescheduled creditor meetings. It received court approval to hold votes on its offshore debt restructuring plan in July, with the so-called scheme meetings originally scheduled for last week.

The gatherings had previously been pushed back several days, which the builder said was to give creditors time to consider the implications of a stock sale by the developer’s electric-vehicle unit. Based on March’s road map, Evergrande creditors can receive new notes maturing in 10 to 12 years or a combination of new debt and instruments tied to the shares of the automaker, the developer’s property-services unit or the builder itself.

Evergrande recently sought Chapter 15 bankruptcy protection in New York, a move that if granted would protect it from creditors in the US while it works on a restructuring deal elsewhere.

Evergrande disclosed in April that more than 77 per cent of Class A creditors, which account for US$17 billion of claims and includes an ad-hoc group of bondholders, had acceded to a restructuring support agreement. The figure among Class C creditors that include margin loans and repurchase obligations was “more than 30 per cent.” That’s short of the 75 per cent needed from each creditor group to implement a restructuring through schemes of arrangement.

At a court hearing in July, an Evergrande lawyer said the developer prepared fresh information for creditors, including a recovery analysis done by Deloitte. Average recovery for Evergrande notes would be 22.5 per cent, versus 3.4 per cent if the firm gets liquidated, he added. BLOOMBERG, REUTERS