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The primary unit of China Evergrande Group, known as GDA Real Estate, has announced that the owners of an 8.2-billion-yuan ($1.19 billion) bond will have a meeting to decide whether they will participate in the group’s offshore restructuring plan. This particular bond was originally due on July 8th but was extended by 12 months last year. If the owners agree to the proposal, it could be the first time onshore bonds are included in the restructuring plan.
Typically, debts that are based on land have a greater importance in being repaid compared to debts that are based overseas, resulting in more favourable terms for restructuring. Evergrande, which has a debt of over $300 billion, including offshore debt, has been a prominent player in the real estate debt crisis in China. As a result, numerous Chinese developers have defaulted in the past year, leading them to engage in talks for debt restructuring
Hengda has stated in their submission made last week that bondholders who are implicated will have the opportunity to decide if they want to empower Guotai Junan Securities to act on their behalf and approve the offshore restructuring proposal. The restructuring proposal, which was disclosed by Evergrande last month, offers creditors the option to either exchange all of their current holdings for new notes that have maturities ranging from 10 to 12 years, or to convert them into a variety of new notes that have tenors between 5 to 9 years, and equity-linked instruments.
The proposal pertains to the onshore debt and specifically covers the 8.2-billion-yuan bond and the guarantees for debts amounting to $8.09 billion. If the creditors of Evergrande give their consent to the proposal they will be paid a fee of 0.25% of their outstanding debt. In case the proposal is not approved, bondholders can still opt to participate in the restructuring plan on their own.
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