China Evergrande has failed to make good on its promise to deliver a preliminary restructuring plan to its investors by the end of July, instead releasing “preliminary restructuring principles” for its offshore debt. These principles promised creditors asset packages which may possibly include shares of its offshore electric vehicle unit and property management services. Bloomberg notes that investors were hoping that the promised proposal would clearly outline how the Chinese developer would fulfill its obligations on $20bn in outstanding dollar bonds through maturity extensions or asset sales. In response to why the deadline for the plan was missed, newly appointed CEO Shawn Siu said that “the company encountered complicated and challenging matters” and asked for more patience.
Adding to its woes, Evergrande announced on Sunday that its subsidiary, Evergrande Group (Nanchang) Co, had been ordered to pay RMB 7.3bn ($1.08bn) to an unnamed guarantor for breaching the terms of an agreement. The guarantor had provided guarantees for Nanchang’s borrowings. Nanchang subsequently provided counter-guarantees by pledging 1.3bn of Shengjing Bank shares as collateral and when it failed to repay the loan, the guarantor claimed against Nanchang. After the arbitration ruling, the guarantor now “has priority to receive compensation from the sales of the [Shenjing] shares” which will contribute to the $1.08bn Nanchang needs to pay.
Evergrande’s bonds are trading at distressed levels of around ~5-9 cents to the dollar.