The financially troubled Chinese real estate company Evergrande has revealed its intentions to restructure over $20 billion (£16.2 billion) in offshore debt. This move, which could serve as a precedent for other developers who are experiencing financial difficulties, was recently unveiled.
According to the company’s statement, the measures will assist “efforts to resume operations and resolve concerns on shore.”
Evergrande is in default on its debts, which total more than $300 billion, and the default occurred in late year 2021.
Traders have been shaken by the turmoil and now fear that it will spread to China’s housing market.
Evergrande stated on Wednesday to the Hong Kong Stock Exchange that their proposed reorganization “complies with worldwide restructuring norms and best practices.” The remark was made in response to a question regarding the reorganization.
The company stated in an additional statement that it will “use its best endeavors to reestablish a healthy ecosystem of capital and business, repair its capital structure, and stabilize its business operations.”
Creditors will get new bonds and equity-linked investments backed by Evergrande as part of the proposal. These new bonds and investments will be backed by the firm as well as two of its Hong Kong-listed subsidiaries.
This past week, Evergrande said that a significant portion of offshore bondholders had given its approval to the proposal.
A restructuring is scheduled to take place on October 1st, and the company has plans to seek clearance from additional bondholders by the end of this month.
In the following months, the company’s long-overdue financial reports for the years 2021 and 2022 are also scheduled to be published.
During this time, the trading of its shares that are listed in Hong Kong would continue to be halted.
Evergrande, which is now the property developer with the greatest debt in the world, used to be China’s most successful seller of real estate.
The company has rapidly developed in order to become one of the largest firms in China, and it did this by borrowing more than $300 billion.
On the other hand, in 2020, officials in China adopted new regulations to regulate the amount of debt owed by significant real estate developers.
As a result, Evergrande was forced to drastically reduce the prices of its properties in order to maintain a steady flow of revenue and keep the company afloat. Since then, it has had a hard time covering the interest payments on its obligations.
Evergrande failed to meet a significant deadline in December 2021 and did not make interest payments on approximately $1.2 billion worth of international loans.
Evergande was deemed to be in default by significant credit rating agencies, a move that has the potential to hinder restructuring talks with investors.
The Chinese real estate market is feeling the effects of a weakening economy as well as a severe shortage of cash. It is responsible for almost one-third of the economic output in the country, with the second-largest economy in the globe.