Evergrande’s overseas debt restructuring ushered in important progress.
On the evening of March 22, Evergrande issued an announcement saying that Evergrande and the overseas creditor group had signed the main terms of the restructuring plan:Evergrande will issue new bonds to replace the original bonds. The new bonds have a term of 4 to 12 years and an annual interest rate of 2% to 7.5%. No interest will be paid in the first three years. Interest will be paid at the beginning of the fourth year and 0.5% of the principal will be paid.
It is reported that the signing of the main terms of Evergrande’s overseas debt restructuring means that the overseas debt restructuring may be successful. If Evergrande’s overseas debt is successfully restructured, the risk of liquidation ordered by the Hong Kong court will be removed.
Evergrande stated that the above-mentioned debt restructuring will alleviate the pressure of overseas debt repayment to a certain extent, and provide conditions for the company to resume operations and solve domestic problems. Evergrande will do its best to restore a virtuous circle of funds and business, repair the capital structure, and achieve stable operations.
In addition, the China Evergrande Stock Exchange announced that Hengchi 5 will be officially mass-produced on September 16, 2022, and the first mass-produced cars will be delivered on October 29, 2022. As of the date of this announcement, Evergrande New Energy Vehicles has delivered more than 900 vehicles. Evergrande has taken steps to cut costs in order to maintain basic business operations due to liquidity constraints, such as reducing its headcount.
Overseas Debt Handling: Issuing New Bonds to Replace Old Debts
Evergrande, facing the risk of liquidation, has finally made significant progress in resolving overseas debts.According to the announcement, China Evergrande and its advisors have engaged in constructive dialogue with the company’s various stakeholders over the past few months regarding the proposed restructuring of the group’s offshore debt.
The company has progressed with some major holders of: (a) Evergrande’s issuance of US dollar senior secured notes with an aggregate principal amount of US$13,922.5 million; U.S. dollar senior notes with an aggregate principal amount of $5.226 billion.
It is worth noting that, according to the concept of Evergrande’s term sheet, Evergrande Property Group Co., Ltd. holds a total of 2.494 billion shares of Evergrande Property held by China Evergrande, and 749 million shares of Evergrande Property should be deposited in securities. The accounts were pledged to provide security for the A2 Evergrande Property Equity-Linked Notes and the C2 Evergrande Property Equity-Linked Notes respectively. Evergrande Property Shares subject to the pledge of Evergrande Property Share Accounts may be released for sale to strategic investors subject to certain conditions specified in the Evergrande Property Term Sheet. The sale of Evergrande Property Shares to strategic investors shall be made proportionally between the A2 Evergrande Property Equity-Linked Notes and the C2 Evergrande Property Equity-Linked Notes.
In addition, China Evergrande will issue mandatory exchangeable bonds, which can be exchanged for 2.332 billion Evergrande property shares, accounting for approximately 21.57% of the total number of Evergrande property shares issued as of the date of the Evergrande term sheet. These Evergrande property shares shall be deposited into Pledged securities account.
At present, China Evergrande and the overseas creditor group have signed the main terms of the restructuring plan: Evergrande will issue new bonds to replace the original bonds; the new bonds have a term of 4 to 12 years, with an annual interest of 2% to 7.5%; no interest payment for the first three years , Interest and 0.5% of the principal will be paid at the beginning of the fourth year.
Evergrande said those discussions culminated in a binding agreement with members of the special group of existing noteholders on the core terms of the proposed debt restructuring. China Evergrande expects that the restructuring agreement will come into effect on October 1, and the estimated recovery of overseas unsecured creditors is about 9.73 billion yuan.
Evergrande stated that the signing of the term sheet by the company and the special group of creditors is a major and positive milestone for the realization of the proposed debt restructuring, and represents that all parties have made significant progress in realizing the proposed restructuring.
Stock resumption has not yet met the conditions
It is worth mentioning that China Evergrande has been suspended for one year since March 21 last year, and among Hong Kong real estate companies, Kaisa has taken the lead in resuming trading. When will Evergrande resume trading?
China Evergrande stated that as of the date of the announcement, none of the resumption conditions have been met, and the company will continue to work hard to meet the resumption conditions as soon as possible under actual circumstances. At present, the company is still preparing the unpublished audited annual results.
Regarding the progress of domestic debt, China Evergrande stated that since 2022, it has completed the extension of the principal and/or interest of 9 domestic corporate bonds, with an extension period ranging from 6 months to 1 year, involving a principal amount of approximately RMB 53.5 billion , the interest is RMB 3.703 billion.
At the same time, its domestic debt overdue scale is relatively large. On December 31, 2022, the overdue amount of domestic interest-bearing liabilities reached approximately RMB 208.4 billion, the overdue amount of domestic commercial acceptance bills reached approximately RMB 326.3 billion, and the overdue amount of domestic contingent debt reached About RMB 157.3 billion, and some domestic creditors have also taken legal action against the group.
It is worth mentioning that Evergrande also disclosed the latest situation of the new energy vehicle business in the announcement. Among them, Hengchi 5 has been officially mass-produced on September 16, 2022, and the first mass-produced car has been launched on October 29, 2022. The delivery started on 12th, and as of the announcement date, Evergrande New Energy Vehicles has delivered more than 900 vehicles.
However, due to tight liquidity, in order to maintain basic business operations, Evergrande New Energy Automobile has taken measures to cut costs, such as reducing the number of employees. As of March 2023, Evergrande New Energy has a total of 2,795 employees. The number of employees on June 30, 2019 decreased to 3,742. According to Evergrande’s analysis, in the absence of new liquidity injection, Evergrande’s new energy vehicles will face the risk of suspending production.
Author of this article: Hu Feijun, source: Brokerage China (ID: quanshangcn), original title: “Major Progress! Evergrande’s overseas debt restructuring plan has been released, and new debts will be issued in exchange for old debts! Evergrande New Energy Vehicles Has Delivered Over 900 Vehicles》
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