“In light of the Company’s current situation and consultations with its advisors and creditors, the Company is revising the terms of the Proposed Restructuring to meet the Company’s objective situation and the demand of the creditors,” according to a voluntary statement from Evergrande to the Hong Kong Stock Exchange.
Without providing further details of the proposed restructuring plan, the statement added that as a consequence of the proposed restructuring, it was canceling previously scheduled meetings and court hearings on the matter.
Evergrande was scheduled to hold hearings in Hong Kong this week, as well as in the Cayman Islands and the British Virgin Islands later this month.
The firm’s hearing in the Hong Kong insolvency court could have resulted in the liquidation of the property developer’s assets.
A hearing scheduled for Oct. 25 in the Southern District Court of New York has also been postponed. This was planned when the developer filed for Chapter 15 bankruptcy protection in the United States in August, according to the statement.
Regulatory Hurdles Upset Bondholders
Markets are closely monitoring the ongoing investigations of former and current executives of Evergrande, as apprehension grows over the escalating property crisis in China.Ad Hoc said in a statement released earlier this month that Evergrande’s failure to obtain Chinese regulatory permits had resulted in “a spectacular turn of events,” putting the “heavily negotiated offshore restructuring” in jeopardy.
Previously, Evergrande announced that it would be unable to meet the requirements for issuing new notes—which refer to short- or medium-term securities—because Hengda Real Estate Group is under investigation by the China Securities Regulatory Commission and the National Development and Reform Commission.
Ad Hoc said that the offshore restructuring was intended to ensure Evergrande’s ability to continue as a going concern and considered using the firms’ offshore assets as additional credit support in compliance with international restructuring principles.
According to its 2022 annual report, Evergrande has more than 1,200 unsold apartment projects, in addition to tourism resorts and properties. It also operates over 100 major infrastructure projects based in mainland China.
However, its assets are also being grabbed. Reportedly, a lender has already assumed control of the Evergrande Tower in Hong Kong. The annual report also details the sale of seized property in the city’s Yuen Long district for $637 million.
The restructuring also involves the provision of additional collateral in the form of Ad Hoc’s non-core offshore assets, reflecting the fact that creditors now own the economic interests in these offshore assets due to the group’s insolvency. Chairman Hui Ka Yan, who is currently under police investigation for unspecified crimes, would no longer be the controlling stakeholder following a restructuring, according to Ad Hoc.
In the Chinese real estate market, however, Evergrande is not alone.
Evergrande’s EV Unit
According to Nikkei Asia, the proposed restructuring could also impact the potential share sale in Evergrande’s electric vehicle (EV) division, which would be affected by a revision of the reorganization plan.Evergrande in mid-August agreed to issue fresh shares of its New Energy Vehicle to NWTN for $497 million to acquire 27.5 percent of the EV unit’s increased share capital. Each of the freshly issued shares will be valued at HK$0.63 (about $0.08), which is a 12 percent premium over the share price on Sept. 27 but a 63 percent discount from the time the agreement was signed.
This month, NWTN asked the EV unit whether or not China Evergrande Group’s restructuring plan needed to be amended or if a new restructuring plan would be initiated. NWTN also wanted to know if the share subscription agreement would be renegotiated.
