Evergrande Dollar Bonds Jump on Signs of Restructuring Progress

By BLOOMBERG

China Evergrande Group’s dollar bonds climbed the most in four months after signs of progress in what will likely be one of the nation’s largest restructurings. 

The developer’s note due 2025 climbed 4.9 cents on the dollar to 16.9 cents, set for its biggest jump since late September, after REDD reported Friday that the Guangdong government plans to release a debt restructuring framework by March. 

China has taken a leading role in the borrower’s restructuring, with government officials in Evergrande’s home province facilitating meetings between struggling developers and state-owned firms. The developer, saddled with $305 billion of liabilities as of mid-2021, was deemed to be in default in December after missing dollar-bond payments. It set up the risk management committee that month, saying it would “actively engage” with creditors to formulate a viable restructuring plan.

Guangdong’s local government proposes to restructure Evergrande’s debt out of court and plans to separate the offshore debt and assets from the company’s onshore overhaul, according to the REDD report which didn’t cite the source of its information. It aims to repay 150 billion yuan ($23.7 billion) of the builder’s offshore debt using asset sales that include its electric-vehicle and property-management units, collectively valued at about $5.5 billion, the report said. Evergrande declined a Bloomberg request for comment.

Separately, Evergrande has kicked off a process to identify bondholders and said the risk management committee plans to hire additional financial and legal advisers.

The company has started the bondholder identification exercise among some offshore creditors, according to two holders of its dollar notes who said they received the notice this month. Officially identifying bondholders is typically a key phase in a restructuring, as a borrower seeks clarity on its investor base and prepares for future communication. 

Meanwhile, Evergrande’s risk management committee proposes to engage China International Capital Corp. and BOCI Asia Ltd. as financial advisers, and Zhong Lun Law Firm LLP as a legal adviser to help the developer deal with its debt stress and respond to creditors’ demands, Evergrande said earlier Friday. 

The developments come a day after a bondholder group said Evergrande had failed to substantially engage with it on restructuring efforts. The group said it will “seriously consider enforcement actions” to protect investors’ interests and wants to be consulted before any further assets are sold.

The financial and legal advisers will help the company in “mitigating and eliminating” debt risks, follow up with creditor demands and deal with debt issues on a “fair and equitable basis,” Evergrande said in a statement to the Hong Kong stock exchange.