Evergrande creditor group backs the Chinese developer’s efforts to keep onshore unit operational, opposes bankruptcy process
An ad hoc group of creditors of China Evergrande’s offshore unit has said it supports the management’s efforts to keep the embattled Chinese developer operational, ahead of a key court decision on Monday when the distressed developer faces the risk of a liquidation order.
The group of creditors, which owns about US$2 billion offshore notes of Scenery Journey and guaranteed by Tianji Holding – offshore units of Evergrande – issued a statement late on Friday urging that Hengda Real Estate, Evergrande’s flagship onshore unit, be allowed to maintain business operations to ensure completion of homes and delivery of homes.
“No stakeholders of Hengda, be it customers, suppliers, creditors, or the PRC government, would benefit from forcing Hengda into a multi-year, value-destructive bankruptcy process,” said the statement issued by the group.
“Such a bankruptcy process would only detract from the common goals of ensuring the prompt completion of projects and the timely delivery of homes, as well as procuring the long-term sustainability of Hengda as a going concern,” it said.
Signage for China Evergrande Group’s Evergrande Plaza, in Hefei, China, on Sunday. Photo: Bloomberg
There is also “no benefit or upside” in any bankruptcy of Hengda to the noteholders of Scenery Journey, the statement said, adding that the interests of Hengda’s stakeholders are best served through the company’s continued operation.
The group also added that keeping Hengda operational would also ensure completion of 35 onshore projects, many of which are unleveraged and are close to completion requiring little additional funds.
Creditor seizes 2 Hong Kong mansions linked to Evergrande’s Hui Ka-yan
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The group, which is advised by legal firms Kirkland & Ellis and Moelis & Company, said it will “continue working together with Hengda and its management to support their efforts”.
Evergrande, one of the most indebted developers globally, faces a key court hearing on Monday where a winding-up order is “highly likely” to be granted, if no restructuring plan is ready, as per Justice Linda Chan at the last hearing on October 30.
Evergrande is trying to reorganise some US$20 billion of defaulted debt and claims, in what is the largest workout by a Chinese company with offshore creditors. A proposal presented to creditors in late March offered some options, including instruments tied to equity of the company and its two Hong Kong-listed units.
The restructuring process hit a snag in September when the company failed to meet regulatory requirements for a bond issue – a key plank of the initial restructuring proposal. These regulatory hurdles emerged as authorities investigated chairman Hui Ka-yan and Hengda Real Estate.
Evergrande’s shares fell 4.8 per cent to HK$0.24 on Friday. It has crashed 99 per cent from its peak in 2021, erasing HK$225 billion in market value.
