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Evergrande Strikes Deal for $19 Billion Bond Restructuring

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The Guangzhou-based developer became the highest profile victim of the Chinese government’s deleveraging campaign more than two years ago, which fueled a sharp slowdown in the property sector and ultimately led to dozens of dollar bond defaults. Its negotiation with bondholders—which investors said often appeared close to faltering—covered more than $19 billion of bonds.

The restructuring has been agreed to by an ad-hoc bondholder group that holds more than a fifth of Evergrande’s international bonds, according to people familiar with the matter. The company’s other bondholders have until March 31 to approve the restructuring. Evergrande said if the deal doesn’t go ahead and the company goes into liquidation, investors are likely to make somewhere between 2 cents and 9 cents for every dollar of bonds they hold.

Evergrande, which is the most indebted property company in the world, has given its investors two options. Those who are unwilling to accept any principal losses on their bonds can get new debt with a maturity of 10 to 12 years, paying coupons of 2% to 4% a year. Investors who are willing to accept some principal losses can choose a mix of shorter-term bonds and equity-linked notes, which will be backed by shares in Evergrande or two of its listed subsidiaries, a property services company and a new energy vehicle company.

The ad-hoc group includes distressed debt funds that picked up Evergrande’s bonds for cheap after its default in December 2021. The company’s $4.7 billion bond, which is due to mature in June 2025, was bid at just over 9 cents on the dollar on Thursday, according to Tradeweb.

Evergrande was one of China’s biggest sellers of new homes until it entered a downward spiral in late 2021, after Chinese authorities imposed tight borrowing restrictions on property developers. Before its liquidity crisis, the developer had borrowed heavily from banks and investors in mainland China. 

Evergrande has spent much of the past year trying to work through numerous challenges. When it ran short of cash last year, it stopped paying most of its contractors and construction of many of its developments was halted. It also stopped making interest and principal repayments on wealth-management products it had sold to employees, clients, and contractors to finance its operations. It has more recently sold assets to repay debt, including Evergrande’s stake in a domestic bank, which was bought by state-owned enterprises for more than $1 billion. 

In March 2022, Evergrande said that a group of Chinese banks had seized more than $2 billion held by one of its key subsidiaries, angering bondholders. An independent investigation blamed weak controls and poor management decisions for the incident. Evergrande had indirectly used deposits from units of its property-service arm to borrow money for itself, a process that involved dozens of third-party companies and multiple banks. 

Evergrande Chairman

Hui Ka Yan,

who founded the company in the mid-1990s, will convert $341 million of personal loans to his electric-vehicle subsidiary, China Evergrande New Energy Vehicle Group Ltd., into equity in the company, according to a filing with the Hong Kong stock exchange. The $650 million of Evergrande and subsidiaries’ offshore notes held by Mr. Hui will be used to support the restructuring, according to the filing.

However, the electric-vehicle unit said Thursday it might have to halt production of its flagship Hengchi 5 model if it couldn’t obtain fresh financing. Evergrande said in the absence of new funding, the electric-vehicle arm will “face the risk of shutdown.” The electric-vehicle arm has delivered more than 900 units of Hengchi 5 model, according to stock-exchange filings.

Evergrande had contracted sales of the equivalent of $4.6 billion in 2022, down from $64 billion in annual sales in 2021 and more than $100 billion before its financial problems mounted. 

The company said its main objective over the next three years is finishing properties it is currently developing. It needs $36 billion to $44 billion of new funding to do that. Evergrande plans to use any money generated by its existing projects to pay back this new financing, rather than to settle old debt. 

Write to Rebecca Feng at [email protected], Frances Yoon at [email protected] and Alexander Saeedy at [email protected]

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8



The Guangzhou-based developer became the highest profile victim of the Chinese government’s deleveraging campaign more than two years ago, which fueled a sharp slowdown in the property sector and ultimately led to dozens of dollar bond defaults. Its negotiation with bondholders—which investors said often appeared close to faltering—covered more than $19 billion of bonds.

The restructuring has been agreed to by an ad-hoc bondholder group that holds more than a fifth of Evergrande’s international bonds, according to people familiar with the matter. The company’s other bondholders have until March 31 to approve the restructuring. Evergrande said if the deal doesn’t go ahead and the company goes into liquidation, investors are likely to make somewhere between 2 cents and 9 cents for every dollar of bonds they hold.

Evergrande, which is the most indebted property company in the world, has given its investors two options. Those who are unwilling to accept any principal losses on their bonds can get new debt with a maturity of 10 to 12 years, paying coupons of 2% to 4% a year. Investors who are willing to accept some principal losses can choose a mix of shorter-term bonds and equity-linked notes, which will be backed by shares in Evergrande or two of its listed subsidiaries, a property services company and a new energy vehicle company.

The ad-hoc group includes distressed debt funds that picked up Evergrande’s bonds for cheap after its default in December 2021. The company’s $4.7 billion bond, which is due to mature in June 2025, was bid at just over 9 cents on the dollar on Thursday, according to Tradeweb.

Evergrande was one of China’s biggest sellers of new homes until it entered a downward spiral in late 2021, after Chinese authorities imposed tight borrowing restrictions on property developers. Before its liquidity crisis, the developer had borrowed heavily from banks and investors in mainland China. 

Evergrande has spent much of the past year trying to work through numerous challenges. When it ran short of cash last year, it stopped paying most of its contractors and construction of many of its developments was halted. It also stopped making interest and principal repayments on wealth-management products it had sold to employees, clients, and contractors to finance its operations. It has more recently sold assets to repay debt, including Evergrande’s stake in a domestic bank, which was bought by state-owned enterprises for more than $1 billion. 

In March 2022, Evergrande said that a group of Chinese banks had seized more than $2 billion held by one of its key subsidiaries, angering bondholders. An independent investigation blamed weak controls and poor management decisions for the incident. Evergrande had indirectly used deposits from units of its property-service arm to borrow money for itself, a process that involved dozens of third-party companies and multiple banks. 

Evergrande Chairman

Hui Ka Yan,

who founded the company in the mid-1990s, will convert $341 million of personal loans to his electric-vehicle subsidiary, China Evergrande New Energy Vehicle Group Ltd., into equity in the company, according to a filing with the Hong Kong stock exchange. The $650 million of Evergrande and subsidiaries’ offshore notes held by Mr. Hui will be used to support the restructuring, according to the filing.

However, the electric-vehicle unit said Thursday it might have to halt production of its flagship Hengchi 5 model if it couldn’t obtain fresh financing. Evergrande said in the absence of new funding, the electric-vehicle arm will “face the risk of shutdown.” The electric-vehicle arm has delivered more than 900 units of Hengchi 5 model, according to stock-exchange filings.

Evergrande had contracted sales of the equivalent of $4.6 billion in 2022, down from $64 billion in annual sales in 2021 and more than $100 billion before its financial problems mounted. 

The company said its main objective over the next three years is finishing properties it is currently developing. It needs $36 billion to $44 billion of new funding to do that. Evergrande plans to use any money generated by its existing projects to pay back this new financing, rather than to settle old debt. 

Write to Rebecca Feng at [email protected], Frances Yoon at [email protected] and Alexander Saeedy at [email protected]

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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