Evergrande wins support from some creditors for US$19 billion offshore debt workout
- Chinese property giant’s debt workout could set the benchmark for other leveraged developers
- Business sustainability concerns swirl as Evergrande still needs up to 300 billion yuan (US$43.6 billion) in the next three years to complete unfinished projects
Creditors who represent over a fifth of Evergrande’s US$13.9 billion existing bonds and a third of the US$5.23 billion bonds guaranteed by the company have signed three separate agreements to “cooperate in order to facilitate the implementation of the proposed restructuring”, the developer said.
The agreement reached by Evergrande and its creditors will serve as a benchmark for other fallen property developers, providing clues as to what terms are acceptable to creditors.
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Raymond Cheng, managing director at CGS-CIMB Securities said last month: “Evergrande’s plan should set a bottom line as this company is deepest in debt and its offer should be the toughest. If other developers’ offers are less appealing than Evergrande’s proposal, it would be hard to win over creditors.”
Under the agreed terms, creditors can choose to receive new bonds with an extended maturity of 10 to 12 years. Another option is to get new bonds with a shorter tenor – five to nine years – along with bonds convertible into shares in the developer’s property services unit, its new energy vehicle arm, or in the company itself.