China Evergrande Group, the troubled property developer that defaulted on its offshore debt in late 2021, has scrapped key creditor meetings that were scheduled for early this week. The company said it had to reassess its restructuring plan, citing lower-than-expected sales and an ongoing investigation by the securities regulator.
The cancellation of the meetings, which were supposed to vote on the proposed debt swap for at least $30 billion of offshore bonds, is a major setback for Evergrande’s efforts to avoid liquidation. The company faces an Oct. 30 hearing at a Hong Kong court on a winding-up petition, which could potentially force it into liquidation if it fails to present a viable restructuring plan.
Evergrande’s shares plunged as much as 24% on Monday, as investors lost confidence in the company’s ability to survive the crisis. Evergrande is at the epicenter of China’s property slump, which has triggered a wave of defaults and downgrades among other developers. The company has total liabilities of 2.39 trillion yuan ($327 billion), among the biggest of any property firm in the world.
Evergrande unable to issue new notes
Evergrande said late Sunday that it could not satisfy the requirements of the China Securities Regulatory Commission (CSRC) and the National Development and Reform Commission (NDRC) to issue new notes. The company cited an investigation of its subsidiary Hengda Real Estate Group Co., without elaborating.
The CSRC had built a case against Hengda in August, relating to suspected information disclosure violations. The NDRC is the top economic planner in China, which oversees the issuance of offshore bonds by Chinese companies.
The inability to issue new notes is a major blow to Evergrande’s planned restructuring, which would have creditors swap their defaulted bonds for new securities with longer maturities and lower coupons. The company had said in August that it had reached an agreement with most of its offshore bondholders on the debt swap, but it needed regulatory approval to proceed.
Evergrande faces criminal probe and protests
The latest developments come as Evergrande faces mounting pressure from various stakeholders, including authorities, creditors, suppliers, employees and homebuyers. The company’s saga has entered a new phase involving the criminal justice system, as some staff of its money management business were detained by police last week.
The money management unit, called Evergrande Wealth Management Co., had sold wealth management products to retail investors, promising high returns and guarantees from Evergrande. However, many investors have been unable to redeem their products or receive interest payments, sparking protests and lawsuits across China.
Evergrande has also been struggling to complete its unfinished projects, which have left hundreds of thousands of homebuyers in limbo. The company has been trying to sell some of its assets, such as its electric vehicle unit and its property management arm, to raise cash and repay its debts. However, the sales have been slow and uncertain, as potential buyers are wary of Evergrande’s legal troubles and liabilities.
