Embattled developer China Evergrande Group plans to publish an offshore debt restructuring term sheet on Wednesday that has been agreed with a key offshore bondholder group, the firm’s lawyer told a Hong Kong court.
The step paves the way for the world’s most indebted property developer to restructure offshore debt of $22.7 billion. This is just part of Evergrande‘s total liabilities, that amount to more than $300 billion.
Evergrande, which began one of China’s biggest debt restructuring processes early last year, expects to sign a deal with general creditors by the end of March, with the restructuring to take effect from October 1, it added on Monday.
The court set the next hearing of a winding-up petition for July 31, when Evergrande is expected to have a more advanced draft of the terms, after its latest timeline secured the petitioner’s agreement not to press immediate demand.
“Legally speaking, they are not formally tied in any way,” the firm’s lawyer said in response to a query from the judge, Linda Chan, whether Evergrande’s restructuring would be dependent on the onshore scheme.
The procedures can be done in parallel, the lawyer added.
Beijing approval needed
Market participants feel any restructuring plan by the firm would first have to get the approval of Chinese authorities, as its huge onshore debt affects many local governments, onshore financial institutions and homebuyers.
In April and May, Evergrande also expects to release in its overdue financial reports for 2021 and 2022. Trade in its Hong Kong shares has been suspended since last March pending the releases.
Once China’s top-selling developer, Evergrande has been at the centre of a property debt crisis in which multiple developers defaulted on offshore debt obligations over the past few years, forcing many to enter into debt restructuring talks.
Evergrande has been trying to reach agreement with major offshore bondholders on terms including swapping part of its debt into equity in two listed units in Hong Kong, sources have told Reuters.
The two units are Evergrande Property Services Group and Evergrande New Energy Vehicle Group.
In a court hearing last November, Evergrande said it aimed to win creditors’ approval for its debt restructuring proposals by the end of February.
- Reuters, with additional editing by Vishakha Saxena