China Evergrande Group will be seeking approval in a Hong Kong court Monday to hold votes on its offshore-debt restructuring plan, the latest procedural step in an overhaul that now hinges on whether the defaulted builder can win more support from creditors.
The hearing involving Evergrande and a unit is scheduled for Monday morning in Hong Kong. The world’s most-indebted developer and another unit have similar hearings this week in the Cayman Islands. If successful, the firms will set out details for holding so-called scheme meetings at which the debt offer will be officially voted on.
Evergrande disclosed in April that more than 77% of Class A creditors, which account for $17 billion of claims and includes an ad-hoc group of bondholders, had acceded to a restructuring support agreement. The figure among Class C creditors that account for nearly $15 billion of claims and include margin loans and repurchase obligations, was “more than 30%.” That’s short of the 75% needed from each creditor group to implement a restructuring through schemes of arrangement, as the company expects to.
The builder first defaulted on a dollar bond in December 2021 following months of uncertainty about Evergrande’s debt-repayment capabilities. That began what has been expected to be one of China’s most complicated debt restructurings.
The company’s struggles helped set off the initial wave of concerns about China’s property sector, which saw new-home sales plunge last year and dollar-bond defaults hit a record high. Sales weakness recently resurfaced as the country’s economy slows, and there’s been a recent uptick in developers missing debt payments for the first time.
The restructuring plan, released in March, proposes that Evergrande credit investors receive new notes maturing in 10 to 12 years or a combination of new debt and instruments tied to the shares of its property-services unit, its electric-vehicle division or the builder itself.
Evergrande, whose contracted-sales ranking in China has rebounded to 18th so far this year, last week announced $81 billion of combined losses for 2021 and 2022. Disclosing the long-delayed results was a marker toward the resumption of stock trading, which will help creditors assess the latest market value of the builder’s equity.
Among other steps before trading can occur, Hong Kong’s stock exchange has said the developer needs to have a winding-up petition filed against the company be withdrawn or dismissed. The next hearing in that case is scheduled for July 31.