Evergrande to negotiate offshore debt restructuring plan with creditors

The Chinese real estate giant Evergrande announced its intention to negotiate with its creditors a “viable plan” for the restructuring of its ‘offshore’ debt in view of the liquidity problems it is going through at a time when its total liabilities exceed US $ 300,000 million.

In a statement sent today to the Hong Kong Stock Exchange, where it is listed, the group also reveals that it has received a demand to comply with its obligations in a guarantee, which would mean disbursing about US $ 260 million.

Evergrande assures that “In view of the current liquidity situation of the group, there is no guarantee that it has sufficient funds to continue meeting its financial obligations.”.

The economic news portal Caixin affirms that the statement is an announcement “cryptic”Of an official default after having been avoiding them at the last minute on several occasions since September.

Likewise, the company warns that not paying the aforementioned US $ 260 million could cause creditors to demand to advance the collection dates of other debts.

This, Caixin points out, would generate a situation of ‘cross-default’ (“crossed insolvency”), in which the non-payment of a single creditor is enough for others to claim the repayment of their loans.

That media recalls that Evergrande’s ‘offshore’ debt is more than US $ 19,000 million.

Since September, the statement said, Evergrande has been “Diligently reviewing“Its capital structure and its liquidity status together with financial and legal advisors,”evaluating all available strategic options and maintaining a continuous dialogue with ‘offshore’ creditors ”.

The company ensures that it is “taking into account the interests of all parties” in the process, and that “it will uphold the principles of justice and legality.”

Authorities intervene

Barely an hour after Evergrande’s announcement, the authorities of the southeastern province of Canton, where the company is based, issued a brief statement in which they revealed that they had “immediately” organized a meeting with the founder and president of the conglomerate, Xu Jiayin.

According to the document, Evergrande asked the regional government to assign a “working group” to the company, a common operation in cases of large companies in trouble, as happened in early 2020 in Hainan (south) with the HNA conglomerate.

The objective of this committee will be “resolve risks effectively, protect the interests of all parties (involved) and maintain social stability ”.

To do this, measures will be taken regarding “the reduction of corporate risks, the reinforcement of internal management and the continuation of normal operations ”.

The Canton authorities claimed to be following with “great attentionThe Evergrande situation.

The Chinese government has already made it clear that the priority is to ensure that both the company and other struggling developers finish building the homes already sold off plan, which in the case of Evergrande would amount to about 1.3 million.

At the moment, the conglomerate, which must face payments on about $ 37 billion of debt before the end of the first half of 2022, has not been very successful in its plans to sell assets to get liquidity.

In recent weeks, the media has reported that Xu – who became the richest man in China – may have sold 9% of his shares for about US $ 344 million and that he has also possibly injected almost US $ 1,100 more. million after ditching personal assets to keep the firm afloat.