Evergrande talks with holdout creditors ahead of wind-up hearing
CHINA Evergrande Group held talks this week with creditors who had opposed its restructuring plan, sources familiar with the matter said, as pressure grows on the developer to show progress on its overhaul before a court hearing on Monday (Oct 30) that could result in liquidation.
Representatives of Evergrande told some investors about the discussions with the creditors who are part of the so-called “Class C” group, the sources said, asking not to be identified as the matter is private. Details of the talks were not available. The company did not immediately offer a comment when reached on Friday.
The group has been one of the major roadblocks to any restructuring, which would be among China’s biggest ever with implications for banks, trusts and millions of homeowners. The bloc is the second-biggest creditor class overall with some US$15 billion of claims. And it’s the larger of two groups that did not provide sufficient backing for Evergrande’s plan based on the builder’s latest public disclosures on the matter in April.
The clock is ticking on Evergrande, the world’s most indebted developer with about 2.39 trillion yuan (S$451.6 billion) of total liabilities. It faces a winding-up hearing in Hong Kong on Monday, where it needs to present “concrete” restructuring progress to help avoid the once-unthinkable risk of a liquidation. The fate of Evergrande and even bigger peer Country Garden Holdings-deemed in default for the first time ever this week-is of broader significance to an economy where the property market and related industries account for about 20 per cent of gross domestic product.
Evergrande said last week that it’s revising the terms of its restructuring plan without giving details, after scrapping creditor meetings at the last minute in September and saying it would need to reassess its proposals.
The developer said in April that those holding more than 30 per cent of class C debt had endorsed its debt plan. That figure was far below the 75 per cent needed from each creditor class to implement a restructuring through what’s known as a scheme of arrangement. Evergrande has listed the class C debt claims without directly disclosing the creditors’ identity.
A NEWSLETTER FOR YOU
Tuesday, 12 pm
Property Insights
Get an exclusive analysis of real estate and property news in Singapore and beyond.
Challenges have mounted on all fronts. Evergrande founder Hui Ka Yan has been suspected of committing crimes and placed under police control, the company said in late September. Once Asia’s second-richest man and worth US$42 billion at his peak in 2017, Hui has now lost his billionaire status, with his net worth falling to about US$970 million.
His fall mirrors the decline of Evergrande itself, which has became a symbol of the broader China property debt crisis after defaulting in 2021. That opened the door to record nonpayments from other real estate firms. The problems for the industry began the year before when authorities laid out “three red lines”, which set leverage benchmarks for builders if they wanted to borrow more money.
The government’s clampdown on debt-fuelled growth along with restrictions on speculation among homebuyers fuelled an unprecedented slowdown in the property market. As that crisis came to threaten worse contagion, authorities have taken several steps in recent months to fine-tune policy including a broad relaxation of downpayment requirements for homes and cuts to some mortgage rates.
But that has not been enough to turn things around: Property investment contracted 9.1 per cent in the first nine months of the year. BLOOMBERG
Share with us your feedback on BT's products and services
