Evergrande Aims To Announce Restructuring Plan Within Six Months

Billionaire Hui Ka Yan’s China Evergrande Group has finally come up with a timeline for its restructuring process, saying now it intends to release a preliminary plan within the next six months as it scrambles to assure creditors. 

The deeply indebted property developer held a call with them last night, and reiterated that it will evaluate the conditions of the entire group, according to a Thursday statement made to the Hong Kong Stock Exchange. The company, which has racked up more than $300 billion in liabilities, is carrying out the relevant auditing work and will “listen carefully to the opinions and suggestions of creditors,” it wrote in the statement. 

But Evergrande’s Hong Kong-listed shares tumbled as much as 5.7 % Thursday, and analysts reacted with skepticism. “It is clear that the market does not think the six-month plan is credible given the scant details in that 30-minute call,” says Justin Tang, Singapore-based head of Asia research at advisory firm United First Partners. “Clearly, there is no concrete solution.” 

The call was led by Siu Shawn, the company’s newly appointed executive director who is also chairman of its Hong Kong-listed electric car unit, Evergrande New Energy Vehicle Group, according to a Reuters report. Evergrande has also recently brought in Liang Senlin as a non-executive director of the board. Liang is the chairman of China Cinda (HK) Holdings, a wholly owned subsidiary of China’s bad debt manager China Cinda Asset Management. 

Still, reassurances that a restructuring plan is in the works only come after repeated expression of frustration from offshore creditors. On Monday, Evergrande publicly urged creditors to refrain from taking “aggressive legal actions” after a group of its international creditors said they had to “seriously consider” enforcement action due to the lack of engagement from the company. Recovery prospects for its offshore bondholders are “in peril” because they rank behind creditors of Evergrande’s almost 2,000 onshore subsidiaries, which don’t guarantee offshore debt, according to Moody’s Investors Service.  

“Evergrande’s lax bond covenants have given it materially greater flexibility to conduct its business without answering to the offshore bondholders,” Jake Avayou, a Moody’s vice president, wrote in a Wednesday research report.

Some creditors are already running out of patience. Oaktree Capital, a Los Angeles-based asset manager, has moved to seize a plot of land in Hong Kong after Evergrande defaulted on a loan against which it had security, according to a Financial Times report. The company originally intended to use the land as collateral in its restructuring process, the report said, citing anonymous sources. Evergrande didn’t respond to e-mailed request for comment.