China Evergrande Group is seeking to complete one of the country’s biggest debt restructurings after posting a combined loss of more than $81 billion over two years.

The defaulted real estate giant asked to convene meetings for offshore creditors to approve its credit overhaul plan, after reporting long-delayed financial statements for 2021 and 2022. Court hearings are scheduled to take place next week, exchange filings showed late Monday.

Losses at China’s most indebted developer shed light on the company’s latest struggles, offering creditors more clues as the developer seeks to restructure its offshore debt. They underscore how much Evergrande has struggled amid a housing crisis that has rocked the world’s second-largest economy over the past two years after the government restricted borrowing by developers.

“There’s potential for approval of its debt-restructuring plan,” said Bloomberg Intelligence analysts Daniel Fan and Adrian Sim. “China Evergrande might act fast to avoid possible breakdown due to offshore litigation for its defaults.”

Evergrande said it seeks to convene meetings with various classes of bondholders as the restructuring plans will be heard in courts in Hong Kong and the Cayman Islands on July 24 and 25. In April, it said investors holding 77% of its Class A bonds backed the plan, while just 30% of Class C holders endorsed it.

The restructuring is set to be one of China’s largest ever, carrying broader implications for the country’s nearly $60 trillion financial system. The company needs at least 75% from each group of creditors to implement the overhaul through so-called schemes of arrangement.

Evergrande is also facing a winding-up hearing on July 31. Several Chinese developers are contending with similar lawsuits from foreign stakeholders frustrated by what they see as the slow pace of restructuring talks. Such petitions can potentially force a court-ordered liquidation.

For more details on the earnings, click here and here.

Soaring Liabilities

Evergrande reported a loss attributable to shareholders of 105.9 billion yuan ($14.8 billion) for 2022, on top of a 476 billion yuan loss the previous year, the filings showed.

The earnings marked the company’s first two full-year losses since its 2009 listing, and represented a sharp reversal from a profit of almost 8 billion yuan in 2020.

Shares of Chinese developers fell on Tuesday morning, with a Bloomberg Intelligence gauge dropping 2.7%. Concerns over the finances of a key unit of real estate conglomerate Dalian Wanda Group Co. added to the gloom.

A brief rebound in China’s housing market earlier this year has been snuffed out as sales and prices resumed declining in June. That has fueled expectations for the government to take more steps to revive demand.

Evergrande saw its sales plummet during the crisis. Revenue plunged by half in 2021 to about 250 billion yuan, before falling further last year to 230 billion yuan, missing the average estimate of six analysts surveyed by Bloomberg.

The developer’s debt pile soared, with total liabilities reaching 2.58 trillion yuan at the end of 2021, or almost $360 billion, on soaring undelivered projects. That figure fell slightly to 2.44 trillion yuan as of December last year.

The biggest liabilities last year were from trade and other payables, which stood at around 1 trillion yuan as of December. Current borrowings fell slightly from a year earlier to 587 billion yuan.

“The results are not encouraging at all,” said Ting Meng, a senior credit strategist at Australia & New Zealand Banking Group. While not a game changer, they confirm how the company has been in deep distress and struggling with operations and repayments, Meng said.

Trading Resumption

Still, Evergrande could be closer to resuming trading of its shares — which has been suspended since March 2022 — after reporting the delayed statements.

“Evergrande’s successful publication would help to avert a forced delisting and advance the company’s debt restructuring,” said Leonard Law, senior credit analyst with Lucror Analytics Pte. “That said, the results do not really matter ultimately, as we believe the business is already broken.”

The firm’s tight cash of 4.3 billion yuan as of year-end, compared with short-term debt of about 587 billion yuan, could explain its imminent need for a debt plan, according to Bloomberg Intelligence analysts.

The restructuring also involves separate schemes for Scenery Journey and fellow offshore unit Tianji Holding Ltd. Evergrande said in April that holders of more than 91% of Scenery Journey bonds have acceded to a restructuring support agreement, along with those holding more than 64% of debt instruments from Tianji.

Evergrande’s auditor, Prism, added a disclaimer of opinion to the accounts, saying it was unable to obtain sufficient appropriate audit evidence.

“Evergrande results won’t impact the market as people should be prepared for bad results,” said Iris Chen, a credit desk analyst at Nomura Securities Co. “The auditor did not give a clean opinion in the report so the actual situation for the company may just be worse.”