Some offshore creditors of China Evergrande Group are planning to join a winding-up court petition against the struggling developer if it fails to present a new debt restructuring plan by next month. Evergrande’s previous debt restructuring plan, announced in March, has been thrown into uncertainty due to an ongoing regulatory investigation into its main unit in China. The turmoil in China’s debt-laden property sector is a threat to the country’s economy and has raised concerns among investors about a spillover into the banking system. Evergrande has been seeking approval from creditors for its proposals to restructure $31.7 billion worth of offshore debt, including bonds and repurchase obligations. Failure to submit a new plan by October 30 could result in the support of the winding-up petition already filed against the developer. However, it is unclear how many creditors are considering this move and the size of their bond holdings.
The news of Evergrande’s inability to issue new debt has surprised a group of bondholders who were seeking meetings with the developer to gather more information. If Evergrande does not present a new restructuring plan by the end of October, this group of bondholders will support the existing winding-up petition. The number of creditors involved and the size of their bond holdings remain unknown. Evergrande’s financial troubles are part of a larger issue within the Chinese property sector, where developers have been struggling to meet debt payment obligations. Government efforts to reduce high debt levels in the sector and curb speculation have contributed to the liquidity crunch. Many developers have been seeking approval from offshore creditors for debt restructuring plans to avoid collapse or liquidation. The news of Evergrande’s missed bond payment and inability to issue new notes has further impacted the company’s stock price and highlights the ongoing challenges it faces.
These latest developments add to the series of crises Evergrande has faced since its financial troubles came to light in 2021 and it defaulted on its offshore debt obligations. The company’s struggles come at a time when Chinese authorities have been implementing measures to revive homebuyer sentiment, including reducing mortgage rates. The outcome of Evergrande’s meeting with creditors, which is scheduled for mid-October, is now uncertain given the company’s recent disclosures. Evergrande has not yet responded to requests for comment on the matter.
