Evergrande to meet onshore bondholders in bid to delay payments

Evergrande will hold an online meeting with renminbi-denominated bondholders this week as the heavily indebted Chinese developer seeks to delay more repayment deadlines and battles to complete its real estate projects.

Hengda Real Estate Group, Evergrande’s main onshore subsidiary, will hold the meeting and subsequent series of votes from January 7-10 with holders of its Rmb4.5bn ($707m) onshore bond, the company said in a statement to the Shenzhen stock exchange on Wednesday.

Evergrande is at the centre of a crisis across China’s vast property sector, with a cash crunch forcing companies to default on their international debts.

The world’s most indebted developer with more than $300bn in liabilities, ranging from onshore and offshore bonds to sums owed to contractors, Evergrande is in the early stages of a large-scale and politically sensitive restructuring process.

The group has missed a series of payments on offshore bonds since September. It has typically transferred the funds before 30-day grace periods expired but failed to do so at the end of one such period in December, leading rating agency Fitch to say it had officially defaulted.

At its meeting this week, which will involve holders of separate onshore renminbi-denominated debt maturing in January 2023, Evergrande will seek to change the date of a redemption option that would allow investors to redeem them from January 8 to July 8. It will also aim to delay a coupon payment due over the same period.

Investors and Chinese authorities have stressed the need to resume work at Evergrande’s hundreds of projects, for which homebuyers often pay before construction is completed, after a widespread halt in activity last year. On December 26, Hui Ka Yan, the group’s billionaire chair, said in a social media post the aim was to deliver properties to owners.

Trading in Evergrande’s shares was suspended on Monday after Chinese media said the company would be forced to tear down 39 residential buildings in the southern province of Hainan. In a filing to the Hong Kong stock exchange on Tuesday, Evergrande confirmed the demolition order from local authorities.

The group stated its contracted sales in 2023 were Rmb443bn, a 39 per cent fall on last year according to Citi analysts, who also noted that its sales fell 99 per cent in December year on year.

Evergrande also said it would “continue to actively maintain communication with creditors, strive to resolve risks and safeguard the legitimate rights and interests of all parties”.

Advisers to a group of international Evergrande bondholders, which include law firm Kirkland & Ellis and boutique investment bank Moelis, complained in October of a lack of meaningful engagement from the company.

Separately, shares in Huarong, China’s biggest bad debt manager and the focal point of creditor concerns earlier in 2021, lost half their value when trading in the group resumed on Wednesday.

Trading was suspended last April when the company failed to release its results, leading to a collapse in the prices of its offshore bonds. In August, the group disclosed record losses of $16bn and subsequently revealed details of a $6.6bn bailout from state-backed companies including Citic. Huarong was previously majority owned by China’s finance ministry.

Its shares slumped as much as 55 per cent in Hong Kong and Huarong’s perpetual bonds, which were trading as low as 54 cents on the dollar in May, are now close to their par value.

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