China Evergrande suffers new blow as curbs on offshore bond sales raise survival alarm, hobble US$20 billion debt workout
- Troubled developer did not meet requirements to sell new offshore debt, saying its onshore unit Hengda is being investigated by authorities
- The firm earlier cancelled creditor meetings scheduled for this week, citing weak home sales and the need to reassess restructuring terms
The developer said it has failed to meet the administrative measures imposed by the China Securities Regulatory Commission and the National Development and Reform Commission for the issuance of new notes in its debt restructuring plan, citing an “investigation” involving its key onshore unit Hengda Real Estate Group.
“The group is unable to meet the qualifications for the issuance of new notes under the present circumstances,” chairman and founder Hui Ka-yan said in a filing to the Hong Kong stock exchange late on Sunday. The administrative measures were related to sale and listing of securities by local companies in offshore markets.
10:57
Boom, bust and borrow: Has China’s housing market tanked?
Evergrande’s shares plunged as much as 24 per cent before closing 22 per cent lower at HK$0.43 on Monday. The company has lost almost HK$335 billion (US$42.8 billion) of market value since its shares peaked at HK$25.80 in July 2020, a month before Beijing unveiled its industry-crippling “three red lines” policy.
“If Evergrande cannot issue debt, it can drag on the restructuring progress and can harm investors’ confidence significantly,” said Gary Ng, a senior economist in Hong Kong at Natixis, a French investment bank. “I do not think creditors’ hope is fully gone, but it will not be a plain sailing journey.”
Under its workout proposal, Evergrande offered new long-term bonds, convertible debt and stakes in its property management and car-making units to appease creditors. It had aimed to lock creditors into full agreement by October 1 and make the terms effective by December 15.