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Last week, China Evergrande Group announced that its subsidiary Hengda Real Estate Group and one of its directors would be sanctioned by stock exchanges for their failure to release their 2021 annual report. The Shanghai and Shenzhen stock exchanges reprimanded Hengda Real Estate and Qian Cheng, an executive director of China Evergrande Group, for not submitting the report before the deadline of April 30, 2022.
Despite facing disciplinary action, the troubled property developer continued to support its executive director, stating that he was still fit for the position. The company also downplayed the impact of the sanctions on its business and operations. With over $300 billion in liabilities, including offshore debt, the company is at the heart of a property debt crisis that has led to multiple Chinese developers defaulting over the past year.
Earlier in the week, Evergrande announced that its electric vehicle division, which is listed on the stock exchange, will record a profit of $3.6 billion by transferring the ownership of two financially burdened companies to another subsidiary as part of the automotive company’s restructuring.
Duration Finance reports that the offshore dollar bonds of the company are currently trading between 6.8 and 7.2 cents on the dollar, while Evergrande’s proposed restructuring plan suggests a recovery rate between 2.1% and 9.3% in a liquidation scenario. Some smaller creditors and a private banker representing others have expressed dissatisfaction with the proposed terms, citing their complexity and unattractiveness, and see little hope for substantial debt recovery or viable alternatives.
The restructuring term sheets offered creditors the choice of exchanging their entire holdings for new notes with maturities of 10 to 12 years or converting them into various combinations of new notes with tenors ranging from five to nine years and equity-linked instruments, as outlined in the nearly 200-page document released by Evergrande last month.
A Chinese investor from an institution stated that although the terms of the restructuring were not attractive, their firm intends to accept the offer due to the limited size of their holding and the lack of better alternatives for quickly concluding the transactions and moving forward.
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