Evergrande offers sweetener for debt revamp as China property crisis worsens

China Evergrande Group will offer asset packages that may include shares in its two overseas-listed businesses as a sweetener for restructuring offshore debt, the developer said, as a stifling liquidity crisis in the property sector continues.

The two listed units are Evergrande Property Services Group Ltd and electric vehicle maker China Evergrande New Energy Vehicle Group Ltd, the embattled developer said in an exchange filing on Friday.

Evergrande's restructuring proposal comes as China's property sector, a key pillar for the world's second-largest economy, lurches from one crisis to another. The sector has seen a string of debt defaults by cash-squeezed developers.

With more than US$300 billion in liabilities, Evergrande, once China's top-selling developer has been at the centre of the crisis and its debt restructuring plan is seen as a possible template for others.

On Friday, Evergrande said in a long-awaited update on its preliminary offshore restructuring proposal that it expected due diligence work on the group to be completed in the near future, and it aims to announce a specific plan within 2022.

The world's most indebted property developer's entire US$22.7 billion worth of offshore debt including loans and private bonds is deemed to be in default after missing payment obligations late last year.

The developer began talks with offshore creditors about the restructuring proposal earlier this year, after advisers for a group of offshore bondholders demanded more transparency from the developer. 

Some bondholders were left unimpressed by the update on Friday.

"It is disappointing but sort of expected... There is nothing they could offer because we all know the company is pretty much a zombie now," said one onshore Evergrande bondholder.

The bondholder said he had been following developments related to the offshore restructuring to get clues on what Evergrande might do with its onshore debt. He declined to be named as he was not authorised to speak to the media.

In its statement, Evergrande said that the due diligence process remains ongoing, given the group's size and complexity and the "dynamics the group finds itself in".

It expected it would take a relatively long time for the business to restore orderly operations and asset value for all stakeholders, due to the state of the real estate markets in China and the overall size of the company's assets and liabilities.

China's economy, of which the property sector accounts for a quarter, only narrowly missed a contraction in the second quarter. A growing revolt by homebuyers this month who are threatening to stop paying mortgages on unfinished projects, has further clouded the outlook for the sector.

Evergrande said it was making its "best effort" to resume work and construction and the group had "partially or completely resumed" construction of 96% of its pre-sold and undelivered projects.