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China Evergrande Races Court Deadline On Debt Restructuring Terms -sources

The Evergrande Center of China Evergrande Group is seen in Shanghai, China September 24, 2021.

China Evergrande Group is aiming to unveil some debt restructuring terms before the next winding-up court hearing on March 20 in order to seek another adjournment, two sources with knowledge of the matter told Reuters.

The world’s most indebted property developer has been trying to reach agreements with major offshore bondholders on terms including swapping part of its debt into equity, the sources and two other people said.

Evergrande, which has more than $300 billion in liabilities, of which $22.7 billion is offshore debt, began one of China’s biggest debt-restructuring processes early last year but has yet to reach agreements with bondholders on the details.

Once China’s top-selling developer, Evergrande has been at the centre of a property debt crisis that has seen multiple developers default on offshore debt obligations over the past years, forcing many to enter into debt restructuring talks.

Evergrande is due to appear in a Hong Kong court on March 20 for hearing on a winding up petition filed by a creditor.

In the last November hearing, the judge ordered Evergrande to achieve some “concrete” progress on the debt revamp process and provide a progress report 14 days ahead of the next hearing, or by around March 6.

The developer told the court at that time it aimed to win creditors’ approval for its debt restructuring proposals by as early as the end of February.

The negotiations with bondholders are still ongoing, the four sources said. Three of the sources said the latest discussion is focussing on the price and ratio of swapping some debt into equity of Evergrande’s two listed units in Hong Kong.

The developer’s two Hong Kong-listed units are Evergrande Property Services Group and Evergrande New Energy Vehicle Group.

The sources could not be named because the restructuring discussions are private.

Evergrande declined to comment.

The debt-to-equity swap plan was suggested by Evergrande as a core part of its restructuring plan, but bondholders have been pushing for better terms, three of the sources said.

One of them said Evergrande has made “some compromise”, but there was still a mismatch in expectations. Bondholders have also been pushing Evergrande Chairman Hui Ka Yan to put in more of his own money to repay debt, the person added.

In July, the developer said it would offer its offshore creditors asset packages that may include shares in two overseas-listed units, and was later said to be considering onshore assets as sweeteners for the restructuring plan.

The developer sat down with some offshore bondholders in-person in Hong Kong for the first time in January after they started official negotiations on the restructuring terms in a virtual meeting in December, sources have told Reuters.