China Evergrande seeks to avoid liquidation with last-ditch debt plan

China Evergrande Group, recognized as the world's most indebted property developer, is facing a critical juncture in its ongoing debt crisis. With over $300 billion in liabilities, Evergrande’s struggle is a significant part of the broader distress in China's property sector, which is crucial to the country’s economy. As the company approaches a pivotal Hong […] 

China Evergrande seeks to avoid liquidation with last-ditch debt plan

China Evergrande Group, recognized as the world's most indebted property developer, is facing a critical juncture in its ongoing debt crisis. With over $300 billion in liabilities, Evergrande’s struggle is a significant part of the broader distress in China's property sector, which is crucial to the country’s economy.

As the company approaches a pivotal Hong Kong court hearing, it is under pressure to present a revised debt restructuring plan for its offshore creditors. The urgency stems from a previous lapse in its original plan, and the court's demand for a concrete proposal to avoid liquidation.

The situation is complex and precarious. Evergrande defaulted on its offshore debt towards the end of 2021, signaling deep financial troubles. The developer’s new proposal, as reported, involves a debt-for-equity swap for some offshore creditors and repayment for the rest through non-tradeable certificates backed by offshore assets. These assets reportedly include minority stakes in other companies and receivables. Additionally, the plan offers creditors a 17.8% stake in Evergrande, on top of a 30% stake in each of its two Hong Kong units.

However, the prospects for acceptance of this new proposal seem dim. Creditors have expressed dissatisfaction with the recovery prospects and growing concerns about Evergrande's future. The October offer, which is part of the new plan, was already deemed unsatisfactory by many creditors, as it implied significant reductions in the value of their investments.

The potential liquidation of Evergrande poses a significant threat not only to the company but also to the global markets, given the size and impact of China’s property sector. If the Hong Kong court orders liquidation, it would involve selling Evergrande’s assets, including its stakes in Hong Kong-listed units and its onshore assets, to repay debts. However, such a process could be fraught with challenges.

Amidst these developments, Chinese authorities have been trying to stabilize the sector, but Evergrande’s situation remains a central concern. The company's founder is under investigation for unspecified crimes, and the company has been barred from issuing dollar bonds, complicating the restructuring efforts.

The outcome of the Hong Kong court hearing and the acceptance of Evergrande's restructuring plan by its creditors will be crucial in determining the future of the company and its impact on the broader economy.

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