China Evergrande to meet local bondholders, seek delay of payments that they can demand as early as Saturday

Heavily indebted developer China Evergrande Group will ask its local bondholders to delay an option where they can demand an early repayment of the firm’s yuan-denominated notes.

Hengda Real Estate, China Evergrande’s mainland Chinese unit, said it will hold an online meeting with bondholders between January 7 and 10 to vote on proposals concerning a 4.5 billion yuan (US$282 million) 6.98 per cent note due in 2023 with a January 8 put option. The put option allows bondholders to demand that China Evergrande pay back the principal this Saturday, even before the bond matures.

The company is proposing to change the option date to July 8 this year. It is also proposing to pay the interest payment due on January 8 six months later.

“Based on the current operation of Evergrande, we hope that the bondholders can agree with the proposed rearrangement of the redemption date and the coupon payment date, so that we can properly move forward the repayment,” the developer said in a statement to the Shenzhen Stock Exchange on Wednesday.

China Evergrande is struggling to stay afloat with 1.97 trillion yuan of liabilities, of which at least US$186.1 million in offshore bond payments are due this month. Another US$2 billion in offshore bond payments are due in March, followed by US$1.045 billion in April.

Why Ocean Flower Island is important to Evergrande, Hainan province

Trading in Evergrande bonds will be halted from Thursday ahead of the meeting with bondholders, the company said in a statement.

The development comes as Beijing appears to be reluctant to bail out China Evergrande. Chinese authorities have signalled that they plan to ring-fence the developer and limit contagion rather than orchestrate a rescue as they have done during past crises.

The People’s Bank of China reiterated in December that risks posed to the economy by China Evergrande’s debt crisis could be contained, and said the developer’s “own poor management” and “reckless expansion” were to blame for the problems it faces.

Evergrande to tear down 39 buildings at Hainan Ocean Flower project

A demolition order was issued by the Hainan government on December 30 last year, asking the developer to tear down 39 blocks on Ocean Flower Island in Danzhou.

Earlier, local governments in Chengdu, in China’s southwestern Sichuan province, and Haikou, capital of Hainan province, both withdrew land that China Evergrande had bought but let sit idle for years.

Evergrande was also downgraded to “restricted default” by Fitch in December, after it missed payments on dollar bonds.