Evergrande has announced plans to restructure approximately $20 billion (£16.2 billion) in offshore debt, which could serve as a model for other struggling developers.
According to the company, the measures will aid “efforts to resume operations and resolve problems on shore.”
Evergrande’s liabilities exceed $300 billion, and the company defaulted on its debts in late 2021.
The crisis has alarmed investors, who fear contagion in China’s real estate market.
Evergrande said in a statement to the Hong Kong Stock Exchange on Wednesday that the proposed restructuring conforms to international restructuring norms and best practices.
The company added that it would “use its best efforts to restore a healthy capital and business ecosystem, repair its capital structure, and stabilize its business operations.
Creditors will exchange their Evergrande bonds for new bonds and equity-linked investments backed by the company and two Hong Kong-listed subsidiaries, per the proposal.
This week, Evergrande announced that an important group of offshore bondholders had accepted the proposal.
It intends to seek the consent of other bondholders by the end of this month, before the restructuring on October 1st.
In the coming months, the company’s overdue financial reports for 2021 and 2022 will also be published.
In the interim, trading of its Hong Kong-listed shares will remain suspended.
Evergrande, the world’s most indebted property developer, was once the most successful developer in China.
The firm aggressively expanded to become one of China’s largest corporations by borrowing more than $300 billion.
In 2020, however, Chinese officials introduced new regulations to regulate the amount of debt held by major real estate developers.
This prompted Evergrande to offer its properties at steep discounts to ensure sufficient revenue to sustain the business. Since then, it has struggled to pay the interest on its debts.
Evergrande missed a critical payment deadline is December 2021 and failed to repay interest on approximately $1.2 billion in international loans.
Major credit rating agencies declared Evergande in default, which could impede investor restructuring discussions.
The Chinese real estate market is under pressure from a slowing economy and a severe shortage of cash. It accounts for approximately one-third of the economic output of the second-largest economy in the world.
