Evergrande Offers Restructuring Principles As Debt Crisis Grows
China Evergrande Group, the world’s most indebted developer at the center of a broader debt crisis in the country’s property industry, unveiled preliminary principles for the restructuring of its offshore debt.
The company said that it will offer some assets outside of China to repay creditors including shares of its electric vehicle and property management services, adding that it plans to announce a full restructuring plan within 2022, according to a filing.
Evergrande’s fate has broader implications for China’s $50 trillion financial system, and could send ripples across banks, trusts and millions of home owners. The sheer size of its liabilities of about $300 billion has left global investors worried that any collapse could spark financial contagion and curb growth in the world’s second-largest economy, which depends on the housing market for about a quarter of gross domestic product.
The property giant defaulted on dollar bonds for the first time in December following liquidity scares that started in 2020, and recently suffered its first rejection from local creditors to extend a note payment, which may result in a landmark onshore default. A string of other builders have added to record nonpayments since last year after a government crackdown on excessive leverage and speculation on housing.
“The whole pyramid is collapsing now,” said Anne Stevenson-Yang, co-founder of J Capital Research Ltd. “What’s different is that things are worse now because of the Evergrande crisis a year ago, which is spreading its tentacles throughout the Chinese economy.”
