China Evergrande has cancelled its scheduled scheme meeting for September 25 and 26, to re-evaluate the terms of its proposed $22.7 billion offshore debt restructuring due to disappointing sales. The troubled property developer, burdened with over $300 billion in total obligations, needs approval from over 75% of debt holders in each category to proceed with the plan. Authorities also apprehended Evergrande's wealth management division employees, signalling potential legal troubles. Furthermore, an investigation into its subsidiary, Hengda Real Estate Group, has impacted the issuance of new notes for debt restructuring. Chairman Hui Ka Yan has advised caution to securities holders and potential investors.
China Evergrande took a decision this week to cancel the scheme meeting set for September 25 and 26, as the troubled property developer re-evaluates the terms of the proposed debt restructuring. Back in March, Evergrande had revealed intentions to restructure its $22.7 billion offshore debt, but due to disappointing sales, they’ve now chosen to reassess their approach.
The company, after evaluating its current circumstances and discussing with its advisors and creditors, believes it’s crucial to review the terms of the proposed restructuring to align with its actual situation and meet the creditors’ requirements, as stated in a filing.
Evergrande requires approval from over 75% of the holders of each debt category to move forward with the plan. This plan provides creditors with various choices, including exchanging debt for new bonds and equity-linked instruments supported by its own stocks and those of its Hong Kong-listed subsidiaries.
Evergrande, burdened with over $300 billion in total obligations, encompassing offshore debt, has been a focal point in a real estate debt turmoil. This crisis has seen several Chinese developers default in the past year, compelling many of them to engage in discussions regarding debt restructuring.
In a separate incident, authorities in southern China apprehended some employees from Evergrande’s wealth management division over the weekend, indicating a potential new investigation that could compound the challenges facing the property behemoth.
China Evergrande announced that due to an investigation into its primary domestic subsidiary, Hengda Real Estate Group, it does not meet the criteria for issuing new notes as part of its debt restructuring scheme. The Chinese securities regulator was scrutinizing the Evergrande unit for potential breaches of information disclosure regulations.
By the conclusion of July, Hengda Real Estate had approximately 277.5 billion yuan ($38 billion) in outstanding debts, along with 1,931 unresolved legal disputes.
Hui Ka Yan, the chairman of China Evergrande Group, cautioned holders of the company’s securities and potential investors to exercise prudence when engaging in transactions involving the company’s securities.
China Evergrande's decision to cancel the scheme meeting originally set for September 25 and 26 reflects the company's ongoing struggle in navigating a complex and evolving financial landscape. With over $300 billion in total obligations and the broader real estate debt crisis in China, Evergrande's situation epitomizes the challenges facing the sector. As the company grapples with these financial and legal challenges, its actions will continue to be closely monitored by the real estate industry and financial markets, with far-reaching implications for China's property market.
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