Wrapup 1: Evergrande's debt revamp roadblock hits China property investors' sentiment

China Oceanwide Holdings

25/09/2023 04:26

(Recasts)
       HONG KONG, Sept 25 (Reuters) - China Evergrande Group's
latest trouble in firming up a long-pending debt restructuring
plan led to a sell-off in its and peers' shares on Monday, as
worries resurfaced about the crisis-hit property sector after a
brief respite.
    Evergrande, the world's most indebted property developer,
which has become the poster child of China's property crisis,
has been working to get its creditors' approval for a debt
restructuring plan after having defaulted in 2021. 
    Under the plan unveiled in March this year, Evergrande
 3333.HK  proposed options to offshore creditors including
swapping their current debt holdings into new notes with
maturities of 10 to 12 years.
    In an unexpected development, the embattled developer said
late on Sunday it was unable to issue new debt due to an ongoing
investigation into its main domestic subsidiary, Hengda Real
Estate Group Co Ltd.
    Hengda said last month it was being investigated by China's
securities regulator for suspected violation over the disclosure
of information.
    Shares in Evergrande plunged as much as 24% on Monday, while
Hong Kong's Hang Seng mainland property sector index  .HSMPI 
was trading 3.7% lower.
    "Its debt restructuring plan is now stuck and can't go any
further," said Steven Leung, sales director at UOB Kay Hian in
Hong Kong. "Other options, such as converting the debt into
shares of other listed units, are also seen not workable now."
    Evergrande's offshore debt restructuring involves a total of
$31.7 billion, which includes bonds, collateral and repurchase
obligations, potentially making it one of the world's biggest
such exercises.
    The developer's latest woes reverse a brief respite for the
Chinese property sector, which accounts for roughly a quarter of
the economy, on the back of Beijing's support measures and two
other major developers forged debt deals with their creditors.
    "Concern over the financial health (of developers) still
clouds the property sector, especially those smaller property
developers with high gearing but very few property projects on
hand," Leung said.
    
    WINDING UP PETITION 
    A string of leading Chinese developers have defaulted on
their offshore debt obligations since the property sector was
hit by an unprecedented liquidity crisis in 2021 after
regulators reined in a debt-fuelled building boom.
    Many of the defaulted developers have been trying to get
their offshore creditors' approval for debt restructuring plans
to avoid a messy collapse or being forced into liquidation
proceedings.
    Not many of those plans have succeeded. 
    Developer China Oceanwide Holdings Ltd  0715.HK , which has
failed to meet its debt obligations, said in an exchange filing
on Monday that a Bermuda court has ordered the winding up of the
company and has appointed joint provisional liquidators.
    The latest roadblock in Evergrande's debt restructuring plan
opens a new front for the developer just a week after police
detained some staff at its wealth management unit, sending its
shares slumping.
    Earlier this month, Evergrande said it had delayed making a
decision on offshore debt restructuring from September to next
month to allow holders of its debt more time to consider its
proposal.
    Evergrande needs approval from more than 75% of the holders
of each debt class to approve the plan.
    The Evergrande development comes as leading developers such
as Country Garden  2007.HK  scramble to avoid a default, keeping
home-buyer sentiment depressed despite Beijing's raft of support
measures to prop up the sector and spur property demand.
    As of the end of August, the combined floor area of unsold
homes stood at 648 million square metres (7 billion square
feet), the latest data from the National Bureau of Statistics
(NBS) show.
    

 (Reporting by Donny Kwok, Writing by Anne Marie Roantree and
Sumeet Chatterjee; Editing by Lincoln Feast and Sam Holmes)
 ((annemarie.roantree@thomsonreuters.com; +852 97387151; Reuters
Messaging: annemarie.roantree.thomsonreuters.com@reuters.net))