Hui, the man behind the world’s most-leveraged builder, had many analysts and creditors staying up late on Wednesday night. The company dropped an announcement at 11pm on a plan to reorganise more than US$19 billion of offshore debt. The grim alternative is a liquidation, with only 2 to 9 per cent recovery for every US$1 owed.

Evergrande wants to win bondholders’ support by March 31. Creditors, including hedge funds preying on the market distress, are likely to agree and ride the recovery wave to extract more upside from more than US$100 billion pile of defaulted debt in the property sector.

“The quicker they solve their defaults, the quicker that they’ll be able to access some of those supportive policies onshore,” said Brandon Gale, head of Houlihan Lokey’s restructuring group in Asia, which advises some distressed developers including Evergrande. There will be more restructuring progress this year because of “a dramatic change in the developers’ attitude”, he added.

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Hui was not alone at China’s biggest political gathering. Shimao Group’s Hui Wing-mau, Zhenro Property’s Ou Zongrong, Guangzhou R&F Properties’ Zhang Li and Country Garden’s Yeung Kwok-keung were among the dozen.

Since the government abandoned its zero-Covid policy, the economy is humming again, and pro-growth bureaucrats in Beijing are preparing to pump in more liquidity to grease activity. Green shoots are emerging from the US$2.6 trillion property market, sustaining the bond party since late October.

The sales bump is adding oomph to prices of property bonds in the secondary market. An index tracking junk-rated, Chinese, high-yield dollar bonds dominated by property issuers surged as much as 90 per cent from a low on November 3, before tapering from a February high.

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The bond rally since early November suggests the property tycoons probably missed the cheapest price to restructure their debt, according to Ron Thompson, managing director of Alvarez & Marsal Asia, who leads the firm’s restructuring practice in the region.

“Deals are starting to get done because they have been negotiating for a very long time and now they know where the bottom lines are for each other,” he said. In the past, most creditors felt companies were not willing to pay, but now they have realised “there is potentially a cash-flow issue, so it requires a haircut”.

Evergrande this week offered its creditors a choice of replacing existing debt with new bonds maturing in five to 12 years. They could also swap debt for shares of the developer or its units in property management services or electric-car manufacturing.

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Analysts expect other troubled developers to rush their debt-resolution plans this month. Sunac, the fourth-largest player, led by founder Sun Hongbin and saddled with US$9.1 billion of offshore debt, is likely to get support for its workout, sources close to the matter told The Post.

CIFI Holdings said “significant progress has been made” for its US$6.85 billion debt restructuring, adding that talks with creditors would start before the end of March. Logan Group said on March 13 that talks to reorganise its US$6 billion debt will commence “now”, while Zhenro Properties expects a preliminary proposal to restructure its US$540 million debt will be available this month.

Among nearly 30 debt-laden developers, nine have proposed or at least pledged to unveil their restructuring plans in the first three months of this year, according to data compiled by The Post. Seven have reached agreements with their creditors and lenders.

“It is still early to say whether we are happy with the outcomes, but it’s clear that uncertainty has been reduced,” said Mark Dong, co-founder of Minority Asset Management in Hong Kong, who bought distressed property bonds late last year. Evergrande’s plan “is a significant deal that will bring some reference to other developers in similar predicaments”.

“For us, time is not the most urgent thing,” he said. “A good plan is really what matters.”

Evergrande’s plan “sets a bottom line”, as the industry heavyweight is the deepest in debt and its offer should be the toughest, said Raymond Cheng, managing director of CGS-CIMB Securities.

“For other big developers like Shimao, Kaisa Group and Sunac, an extension of six to 10 years would be reasonable, while for developers with a smaller debt size, it should be around three to five years,” he said. “If their offers are less appealing than Evergrande’s proposal, then it shows no sincerity and would be hard to win over creditors.”

For now, Sunac, CIFI Holdings and Fantasia Group have put forward what they think are good plans. They offer a debt-to-equity swap for their creditors and seek extension on bond maturities by two to nine years. Smaller players like Modern Land and China Fortune Land have bought more time – up to eight years – to repay their borrowings.

This year, Fantasia got its offshore creditors to agree to a US$1.3 billion debt-to-equity swap. It remains to be seen how many other developers can follow suit. Still, a problem for the equity-swap plan is the dilution of the chairman’s influence, Thompson said.

“These are essentially family-owned companies, and there’s loyalty of the executives to the boss,” he said, adding that the future is so uncertain that some believe it is better to seek extensions and provide the necessary forbearance without the haircut.

Evergrande is still facing existential issues, said Brock Silvers, a Hong Kong-based managing director of investment firm Kaiyuan Capital. The developer needs as much as US$44 billion in additional financing in the next three years to beat the slump.

“Does an investor, having been burned by Hui’s financial mismanagement, really want to bet his entire stake on Hui’s new EV venture?” he asked. “Unlikely.”

Local authorities are also doing their part to spur home sales, lifting purchase caps, easing residency rules and lowering upfront payment requirements, among others. As a result, buyers are spending again, albeit cautiously.

As far as average homebuyers like married couple Ethan Shi and Stephanie Tan are concerned, property developers tainted by debt defaults will struggle in a battle of confidence to lure homebuyers back to their showrooms.

Shi and Tan are in the market for their first home, in Shenzhen, the richest city in the southern Guangdong province. The technology hub has weathered the pandemic and housing market slump better than other top-tier cities. They may have to dig deep – not only into their own life savings but those of their parents too.

“We will only choose among state-owned developers without prior bad records,” said Shi, a 31-year old finance-industry executive. “No matter how deep the discounts offered by private developers, they still have problems delivering pre-sold homes. It’s just too risky to be anywhere near them.”

It’s a wake-up call for developers to repair their cash flow and their balance sheets, not only for Evergrande but also for troubled peers like Powerlong Real Estate Holdings, Sunac and stressed builders like KWG Group Country Garden Holdings.

“Without knowing where the funding stops, many developers are having to devise restructuring plans on the fly, through lengthy negotiations with banks, bondholders, and local governments,” said Andrew Collier, managing director at Orient Capital Research.

One senior executive at a troubled home builder said his company is now pushing to reorganise to catch the funding tailwind. Another executive said builders are uncertain whether they can get full access to Beijing’s policy tools.

While developers are hopeful they can get on the lifeboat, Beijing appears to be selective in its treatment. One industry executive said authorities have been vague about who is worthy of its liquidity support, causing anxiety among the fallen tycoons.

“Everybody wanted to participate in the pick up of the market, and it is quite encouraging recently,” said Sandra Chow, co-head of Asia-Pacific research at credit research firm CreditSights. “But so far what we see is that the help is very selective to those with bigger exposure to first- and second-tier cities and [those] holding commercial assets like shopping malls.”