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China’s Evergrande presents new debt restructuring plan with equity swap for bondholders
China Evergrande has unveiled a fresh debt restructuring proposal for its offshore bondholders, suggesting a debt-to-equity swap that would grant bondholders an approximate 30 per cent equity stake in each of its two Hong Kong-listed subsidiaries.
This development comes as Evergrande grapples with its debt crisis. Sources familiar with the matter gave Reuters the details of the new plan on the condition of anonymity, noting that the offshore bondholders, who hold approximately $19 billion in debt, are likely to face significant losses if they accept the revised terms.
Evergrande's dollar-denominated bonds have recently been trading at around 2.25 cents on the dollar. The company's restructuring woes were further complicated by its billionaire founder, Hui Ka Yan, coming under investigation for suspected criminal activities in late September. Additionally, Evergrande's ability to issue new dollar bonds, a crucial element of its original restructuring strategy, was hampered when its flagship mainland unit became the subject of regulatory scrutiny.
The initiative to propose this new plan was reportedly led by a work committee operating under the southern Guangdong provincial government, which has been overseeing Evergrande's restructuring since late 2021 when the company defaulted on its debt. This renewed proposal holds considerable significance for Evergrande's future, especially as it faces a looming debt restructuring deadline. A Hong Kong court has ordered Evergrande to formulate a concrete debt restructuring plan by December 4, just ahead of a liquidation hearing that will determine the fate of the company.
Evergrande's original restructuring plan, initially supported by an ad hoc group of bondholders before facing disruptions, provided options such as equity-linked instruments backed by the parent company and the two Hong Kong-listed subsidiaries.
Creditors were given the choice to exchange their holdings for new notes with maturities ranging from 10 to 12 years or convert them into various combinations of new notes with tenors spanning five to nine years and equity-linked instruments, with no direct reduction in value.
However, the main challenge now lies in convincing Evergrande's creditors and shareholders in the two Hong Kong-listed subsidiaries that this revised proposal is a viable solution. This is seen as a critical step in the company's efforts to navigate its complex financial situation.
The earlier plan faced opposition from a significant group of creditors known as Class C, which included private lenders, certain Chinese banks, and pre-IPO investors. This group had voiced concerns and sought better terms before the initial plan unravelled. Meanwhile, the ad hoc group of bondholders has expressed dissatisfaction with the new terms that offer equity stakes in the Hong Kong-listed subsidiaries.
(With inputs from Reuters)
Source : https://www.wionews.com
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