Evergrande announces debt restructuring plan in an attempt to defuse market risks: analysts
Published: Mar 23, 2023 06:28 PM

Evergrande Group Photo: CFP

Evergrande Group Photo: CFP

China Evergrande Group has announced a plan for the restructuring of its $22.7 billion offshore debt on Wednesday, a significant move to defuse market risks, while paving ground for a recovering real estate market in the world's second largest economy, industry analysts said.

Observers noted that the debt restructuring could offer some inspiration, as well as a template for its counterparts to settle debt-related issues in the future, while shoring up investor confidence at home and aboard.

Under the proposal, creditors will swap Evergrande bonds for new bonds and equity-linked investments backed by the company and two Hong Kong-listed subsidiaries. In the two main options, creditors can either swap all of their holdings into new bonds with maturities of 10-12 years, or convert them into different combinations of new notes of five to nine years and equity-linked instruments, according to a statement the company filed on the Hong Kong Stock Exchange on Wednesday.

"The restructuring plan will alleviate the company's pressure tied to offshore indebtedness and facilitate the company's efforts to resume operations and resolve issues on shore," Evergrande said in the statement. 

The firm added that it would endeavor to restore a healthy ecosystem of capital and business, repair its capital structure and stabilize business operations.

Evergrande was once China's top-selling real estate developer.

This disclosure means that the current Evergrande debt restructuring has achieved a major milestone, and it is also an important event for the current real estate industry to resolve debt risks. At the same time, it will also offer inspirations for the other real estate developers, Yan Yuejin, research director at Shanghai-based E-house China R&D Institute, told the Global Times on Thursday.

Yan noted that with the gradual improvement of the real estate sector and the increase of market confidence, disposal of the debt woes for other domestic real estate companies will gain pace.

China's top 100 developers' sales saw year-on-year and month-on-month growth in February, showing early signs of a market recovery. 

According to a report released by the China Real Estate Information Corp (CRIC), a provider of real estate information, sales of China's top 100 developers totaled 461.56 billion yuan ($66.8 billion) in February, up 14.9 percent on a yearly basis and up 29.1 percent on a monthly basis.

Overall property supply in the 30 largest cities rebounded, with an increase of 7 percent from January, while housing transactions jumped by more than 40 percent, both on an annual and monthly basis, the report said.

Global Times