Evergrande set end-July target for restructuring proposal after delaying results

  • The company said in January the proposal would come within 6 months
  • Will not meet the March 31 deadline for audited 2021 results
  • Planned deal with CITIC Trust, Guangzhou can provide a model

HONG KONG/BEIJING, March 22 (Reuters) – The besieged Chinese group Evergrande (3333.HK) It will unveil a debt restructuring proposal to its creditors by the end of July, it said Tuesday, after renewed concerns about its financial health due to delays in publishing its annual results.

CEO Seo Chun told investors in a phone call that Evergrande, which considers its $22.7 billion external debt to be in default, is seeking to “further enhance communications” with creditors to reach the end-July target.

Earlier on Tuesday, Evergrande said in a stock exchange filing that it would not stick to the March 31 deadline to present its 2021 financial results because audit work was not completed. Read more

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Evergrande, the world’s largest indebted real estate developer, told investors in January that it aimed to put in place an initial restructuring proposal within six months. Read more

A wave of defaults in China’s real estate sector has investors worried, and while state intervention has quelled market fears about the uncontrolled collapse of Evergrande, investors are still not sure if they will get their money back.

China’s top-selling developer Evergrande, which is now mired in more than $300 billion in debt, defaulted on some overseas bond payments in December, struggling to make payments to suppliers and creditors and to complete projects and homes.

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The developer formed a risk management committee in December made up mostly of members from state companies, with the Guangdong provincial government leading the restructuring.

“With the broad support and understanding of the majority of creditors… we are striving to issue the initial restructuring proposal by the end of July,” committee member Chen Yong told investors.

Evergrande board member Liang Senlin said that as part of its plans to give up assets to pay off some of its overseas debt, the developer is working to sell Yuen Long’s plot of land in Hong Kong as well as the Evergrande commercial building.

Trading in shares of Evergrande, its real estate services unit Evergrande Property Services Group Ltd (6666.HK)China Evergrande New Energy Vehicle Group Ltd . electric vehicle unit (0708.HK) It has been suspended since Monday.

Liang said on the investor call that the developer had been trying to attract strategic investors in both electric vehicles and real estate service units to restore value – a goal he had been pursuing for nearly a year without much success.

Siu said the EV unit aims to begin mass production in June of its inaugural electric vehicle, the Hengchi 5 SUV, after receiving approval to start sales last week.

Some of the investors who attended the call were unimpressed by management’s assurances.

“They basically explained the reason for the suspension of shares trading. There was no new information and the situation remained the same,” said a bond holder who was on the call, asking not to be named because he was not authorized to speak to the media.

model to follow?

Earlier on Tuesday, two sources familiar with the matter told Reuters that Evergrande plans to return land used as collateral for a credit loan to the Guangzhou government, providing a model for local authorities’ involvement that can be replicated with other debt-laden Chinese real estate firms.

The deal centers around a 3.25 billion yuan ($510.73 million) credit loan that the CITIC Trust issued to Evergrande using money raised from investors, according to the sources and a Reuters-reviewed document that partially outlines the plan.

Under the plans, CITIC will return the land used as collateral to Evergrande, which will then transfer it to the Guangzhou city government for sale, the sources said.

The sources said the state-owned Guangzhou City Investment Group will act as the guarantor of the loan and CITIC will repay the principal amount to its investors within two years using funds from the Guangzhou city government.

One person said the plan is still pending investor approval for the credit.

If implemented successfully, this model of local government and creditors working together to solve the Evergrande debt repayment problem could be replicated for other credit loans, analysts said, and more investment firms in state-owned cities may be involved in the company’s debt restructuring process.

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Evergrande, CITIC and Guangzhou City Construction Investment did not respond to requests for comment.

Trust companies, which raise money from wealthy investors, are an important source of financing for Evergrande and other property development companies in China.

In a separate filing on Tuesday, Evergrande said its real estate services group has launched an investigation into how banks forfeited 13.4 billion yuan of deposits pledged as collateral for third-party guarantees.

The forfeiture of funds, which the property services unit discovered when it was preparing its annual report, underscores the turmoil at Evergrande, which has said it will appoint King & Wood Mallesons as additional legal counsel.

(dollar = 6.3634 Chinese yuan)

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Additional reporting by Xuyan Wang and Jing Shuo in Beijing, Claire Jim in Hong Kong and Jason Xiu in Shanghai Writing by Sumit Chatterjee Editing by Christian Schmolinger and Mark Potter

Our criteria: Thomson Reuters Trust Principles.

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