China allows Evergrande to reset debt terms to ease cash crunch

[BEIJING] Regulators in Beijing have signed off on a China Evergrande Group proposal to renegotiate payment deadlines with banks and other creditors, paving the way for a temporary reprieve as the cash-strapped developer struggles to come to grips with more than US$300 billion of liabilities.

China's Financial Stability and Development Committee, the nation's top financial regulator, gave its blessing to Evergrande's plan last month after the property giant missed interest and principal payments on some loans, a person familiar with the matter said, asking not to be identified discussing private information.

The company has already contacted some banks and trusts to request deadline extensions, four sources said. It is unclear how many of those discussions have led to agreements and whether Evergrande intends to delay payments to bondholders.

The development suggests Evergrande has regulatory backing to negotiate with creditors on a piecemeal basis, as it tries to ease a cash crunch that has unnerved investors in China's US$12 trillion bond market. While the company's main banks had discussed setting up a creditor committee as recently as last week to consolidate repayment decisions, lenders and regulators have decided to give Evergrande more time to solve its liquidity crisis before taking more drastic measures, people familiar with the matter said.

The developer's complex web of obligations to banks, bondholders, suppliers and homeowners has become one of the biggest sources of financial risk in the world's second-largest economy.

Evergrande's borrowings totalled 716 billion yuan (S$149 billion) at the end of December, with nearly half due in less than a year. The developer also owed about 830 billion yuan in trade and other payables to suppliers. It has received down payments on yet-to-be-completed properties from more than 1.5 million homebuyers.

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