Evergrande sets end-July target for restructuring proposal after delaying results

Evergrande said in a stock exchange filing it would not meet a March 31 deadline to file its financial results for 2021. PHOTO: REUTERS

HONG KONG (REUTERS) - Embattled China Evergrande Group will unveil a debt restructuring proposal for its creditors by the end of July, it said on Tuesday (March 22), after concerns about its financial health were renewed by a delay in publishing its annual results.

Evergrande, whose US$22.7 billion (S$30.8 billion) worth of offshore debt is deemed to be in default, is seeking to "further enhance communications" with creditors to reach the end-July target, its executive director Shawn Siu told investors on a call.

Earlier on Tuesday, Evergrande said in a stock exchange filing it would not meet a March 31 deadline to file its financial results for 2021 because audit work had not been completed.

The world's most indebted property developer, Evergrande told investors in January it aimed to have a preliminary restructuring proposal in place within six months.

A wave of defaults in China's property sector has rattled investors, and while state intervention has quelled market concern over a disorderly collapse of Evergrande, investors are still in the dark over whether they will recoup their money.

Evergrande, once China's top-selling developer and now reeling under more than US$300 billion in liabilities, defaulted on some overseas bond payments in December and has struggled to repay suppliers and creditors and complete projects and homes.

The developer set up a risk management committee in December made up mostly of members from state enterprises, as the Guangdong provincial government is leading the restructuring.

"With the broad support and understanding from the majority of creditors... we strive to release the preliminary restructuring proposal by the end of July," committee member Chen Yong told investors.

Evergrande board member Liang Senlin said that as part of the developer's plans to divest assets to repay some of its offshore debt, Evergrande is working to sell its Yuen Long land parcel in Hong Kong as well as the Evergrande Centre commercial building.

Trading in shares of Evergrande, its property services unit Evergrande Property Services Group and electric vehicle unit China Evergrande New Energy Vehicle Group have been suspended since Monday.

Mr Liang said on the investor call the developer was trying to rope in strategic investors in both the electric vehicle (EV) and property services units to restore value - a goal it has been pursuing for roughly a year without much success.

Mr Siu said the EV unit aimed to start mass production in June of its inaugural electric car, the Hengchi 5 sport utility vehicle, after getting approval to start sales last week.

Some of the investors who attended the call were not impressed with the assurances from management.

"They mainly explained why the trading of stocks is suspended. There was no new information and the situation remained the same," said a bond holder who was on the call, declining to be named as he was not authorised to speak to the media.

A model to follow?

Earlier on Tuesday, two sources familiar with the matter told Reuters that Evergrande planned to return land used as collateral for a trust loan to the Guangzhou government, providing a model for local authority involvement that could be replicated for other indebted Chinese property firms.

The deal centres around a 3.25 billion yuan (S$693 million) trust loan that Citic Trust issued to Evergrande using funds raised from investors, according to the sources and a document reviewed by Reuters partially outlining the plan.

Under the plans, Citic will return the land used as collateral to Evergrande, which will then pass it on to the Guangzhou city government to put up for sale, the sources said.

State-owned Guangzhou City Construction Investment group will act as a guarantor of the loan and Citic will repay the principal amount to its investors within two years using funds from the Guangzhou city government, the sources said.

The plan is still pending approval from the investors of the trust loan, one of the sources said.

If successfully implemented, this model of local government and creditors working together to resolve Evergrande's debt repayment issue could be replicated for other trust loans, analysts said, and more state-owned city investment companies may become involved in the firm's debt restructuring process.

Trust companies, which pool money from wealthy investors, are an important source of funding for Evergrande and other property developers in China.

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