China Evergrande Group is asking its offshore creditors to refrain from taking hostile enforcement actions to recover their debt as the developer makes “unremitting efforts” to reorganize more than USD310 billion of liabilities. The group will need more time to evaluate potential solutions before further substantive negotiations with offshore creditors, it said in a stock exchange filing, citing the large number of stakeholders and debt complexity. The statement came after reports saying foreign creditors are preparing to take legal actions to compel the Guangzhou-based developer to honor its obligations, having defaulted on several payments on some of its USD20 billion worth of foreign-currency bonds late last year. “The group and its advisers have been proactive in communicating with a wide range of offshore creditors,” Evergrande said in a separate statement on its website on January 24. It asked offshore creditors to “exhibit patience by refraining from taking aggressive legal actions.”
Evergrande had CNY1.97 trillion of liabilities at the end of June 2021, based on its latest interim accounts published in September. Fitch and S&P Global Ratings declared the developer in default after it failed to pay bond interests in December. Once China’s biggest developer by sales, Evergrande fell into distress as cash dried up and the group overstretched itself on borrowings and ventures into car manufacturing. Regulatory measures known as the “three red lines” in August 2020 to rein in excessive debt soon cut off funding for indebted home builders. Evergrande faces at least USD186 million in offshore bond payments this month, USD2 billion in March and USD1.045 billion in April.
Evergrande hired outside financial advisers Houlihan Lokey and Admiralty Harbour Capital in September to engage with creditors soon after it ran into a liquidity squeeze. It has since worked with more advisers in the past two months by turning to China International Capital Corp, BOCI Asia and Zhong Lun Law Firm on its debt workout plan, the South China Morning Post reports.
