Evergrande cancels court hearings after move to revise US$20 billion debt deal

China Evergrande Group has scrapped several court hearings that were previously scheduled in Hong Kong to approve its US$20 billion debt restructuring with several classes of offshore creditors, after the defaulting developer sought to revise terms.

Several other court hearings in other offshore jurisdictions on the same matter were separately adjourned, the developer said in a stock exchange filing on Friday. An October 25 hearing in New York related to its Chapter 15 bankruptcy protection has also been postponed.

The decision to cancel the approval hearings followed a breakdown this month in its debt agreements that forced both parties to backtrack from the home stretch. Evergrande is seeking to reassess terms, citing weaker-than-expected home sales. The sudden “arrest” of its founder and chairman, Hui Ka-yan, by mainland Chinese authorities has also complicated the matter.

After consultations with its advisers, “the company is revising the terms of the proposed restructuring to meet [its] objective situation and the demands of the creditors”, Evergrande said in its filing. It did not disclose any new proposal or when it could be ready.

Walking back the agreement will undo more than two years of efforts and negotiations to keep the developer afloat. Evergrande hired outside financial and legal advisers in September 2021 to overcome its debt burden. Snce then, its total liabilities ballooned by about 20 per cent to 2.4 trillion yuan (US$327 billion at the end of June 2023.

China Evergrande halts creditor meetings in risk to US$20 billion debt workout

Offshore creditors are seeking to recover about US$20 billion in debt and claims against Evergrande after the Guangzhou-based developer defaulted on its obligations in late 2021, triggering the biggest debt reorganisation in China that is still ongoing amid a three-year housing market slump.

Evergrande last month cancelled six meetings with creditors to vote on its debt restructuring plan, before the scheme could be approved by local and offshore courts and made binding on both parties.

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These hearings, that had been scheduled for October 16 and 17 for Hong Kong creditors, for instance, have thus been cancelled, according to the latest filing. Similar hearings for its schemes in the Cayman Islands and the British Virgin Islands have been adjourned indefinitely as well, the developer added.

The decision to vacate the court hearings precedes an October 30 winding-up petition by Top Shine Global. The creditor is seeking to liquidate Evergrande after failing to recover HK$862.5 million (US$110.3 million) from a botched investment plan with the Chinese developer in March 2021.

The stock tumbled 10 per cent this week to HK$0.265, bringing the sell-off this year to 84 per cent. The slump has erased HK$225 billion of its market value from the highest point in 2021, before its liquidity crisis got out of hand.