Evergrande weighs cash instalments, equity in HK units for offshore creditors

HONG KONG • China Evergrande Group is considering repaying offshore public bond holders owed around US$19 billion (S$26 billion) with cash instalments and equity in two of its Hong Kong-listed units, two sources said, as the world's most indebted developer looks to emerge from its financial woes.

Evergrande, whose entire US$22.7 billion worth of offshore debt, including loans and private bonds, is deemed to be in default after missing payment obligations late last year, said in March that it would unveil a preliminary debt restructuring proposal by the end of July.

As part of the proposal, Evergrande is looking to repay offshore creditors the principal and interest by turning these into new bonds, which will then be repaid in instalments over a period of seven to 10 years, said one of the sources.

Offshore creditors will also be allowed to swap a portion of their debt into stakes in the developer's Hong Kong-listed property services unit Evergrande Property Services Group, and electric vehicle maker China Evergrande New Energy Vehicle Group, said the two sources.

The first source said up to 20 per cent of the offshore debt can be swapped into equities of those two units. The restructuring proposals are, however, at an early stage and are subject to change, the source added.

It is not immediately clear how Evergrande will be able to secure sufficient cash to implement the cash repayment plan.

The company saw contracted sales plunge by 39 per cent last year from the previous year.

Most Evergrande dollar bonds had fallen below 10 cents on the dollar as at yesterday morning.

One of the bond holders said that most creditors, particularly the hedge funds, may prefer taking a haircut for the swap than go for extended notes.

REUTERS