Overseas debt restructuring changes! Evergrande was unable to issue new notes and suspend the meeting of overseas creditors, leaving Xu Jiayin worth only 20 billion yuan

On the evening of September 24, China Evergrande (03333. HK) announced that China Evergrande's current situation is not eligible for the issuance of new notes in view of the ongoing investigation of Evergrande Real Estate Group Co., Ltd. (a major subsidiary of China Evergrande, "Evergrande Real Estate").

On September 22, China Evergrande announced that since March 22 this year, Evergrande Group's sales have not been as expected. Based on the Company's current circumstances and consultations with its advisers and creditors, the relevant arrangements meetings on the proposed restructuring scheduled for 25 September and 26 September will not be held.

"China Evergrande's announcement that the current situation is unable to meet the eligibility for the issuance of new notes and temporarily suspended the meeting of overseas creditors indicates that its offshore debt restructuring situation may face greater difficulties and challenges." On September 25, Bai Wenxi, chief economist of IPG China, told the China Times.

Affected by the news that the restructuring of China Evergrande's foreign bonds was blocked, on the morning of September 25, the stock prices of China Evergrande, Evergrande Automobile, and Evergrande Property all fell together. As of the midday close, China Evergrande reported HK$0.410 per share, down 25.45%; Evergrande Auto reported HK$0.710 per share, down 21.11%; Evergrande Property reported HK$0.690 per share, down 11.54%.

Unable to qualify for new note issuance

China Evergrande's overseas debt restructuring has revived.

On the evening of September 24, China Evergrande announced that all new notes to be issued under the proposed restructuring must comply with the "Trial Measures for the Administration of Overseas Issuance and Listing of Securities by Domestic Enterprises" issued by the China Securities Regulatory Commission and the "Administrative Measures for the Review and Registration of Medium- and Long-term Foreign Debts of Enterprises" issued by the National Development and Reform Commission, and the company must prove that it complies with the relevant regulations. Given that Evergrande Real Estate Group Co., Ltd. is under investigation, China Evergrande's current situation cannot meet the qualifications for the issuance of new notes.

The reporter of the China Times saw that item 4 of Article 8 of the "Trial Measures for the Administration of Overseas Issuance of Securities and Listing by Domestic Enterprises" clearly points out that domestic enterprises are being investigated according to law due to suspected crimes or major violations of laws and regulations, and if there is no clear conclusion, they must not be issued and listed overseas.

Evergrande Real Estate, which is under investigation, is a domestic entity of China Evergrande. On August 16 this year, Evergrande Real Estate announced that it had received the "Notice of Case Registration" issued by the China Securities Regulatory Commission, and that the China Securities Regulatory Commission decided to file a case against Evergrande Real Estate in accordance with the Securities Law of the People's Republic of China, the Administrative Punishment Law of the People's Republic of China and other laws and regulations due to the company's suspected information disclosure violations and violations.

China Evergrande's offshore debt restructuring involves a capital scale of about US$19.149 billion, and the new notes mentioned this time are the main terms of the restructuring plan it has signed with the overseas creditor panel: on March 22 this year, China Evergrande issued an announcement announcing that it had signed the main terms of the restructuring plan with the overseas creditor panel: Evergrande will issue mandatory exchangeable bonds to replace the original bonds; the new bonds will have a maturity of 4 to 12 years and an annual interest rate of 2% to 7.5%; No interest is paid for the first three years, and interest is paid at the beginning of the fourth year, paying 0.5% of the principal.

Later, China Evergrande stated on several occasions that "most of the debtors have supported the aforementioned restructuring plan". For example, at the end of April this year, China Evergrande announced that holders holding 77% and more than 30% of the outstanding principal amount of Group A and Group C debts respectively had submitted letters of support agreement to join the restructuring agreement.

However, after the restructuring plan was announced, the formal creditors' meeting was repeatedly postponed: on July 26, China Evergrande announced that the Evergrande agreement was scheduled for August 23, and the space-based agreement and the Jingcheng agreement were scheduled for August 22; On August 16, China Evergrande postponed the first meeting to August 28; On August 28, China Evergrande announced that the meeting would be postponed to September 25 and September 26, respectively.

On September 22, China Evergrande issued an updated information announcement on overseas debt restructuring, pointing out that since March 22 this year, Evergrande Group's sales have not been as expected. Based on the Company's current circumstances and consultations with its advisers and creditors, the Company believes that it is necessary to revisit the terms of the proposed restructuring to match its objective circumstances and creditors' demands. In view of the above, the meetings on the proposed restructuring scheduled for 25 September and 26 September will not be held.

At the same time, the hearing time of China Evergrande's determination of the agreement was also delayed. On the evening of September 8, China Evergrande announced that the approval hearings of the Jingcheng Agreement Arrangement, the Cayman Islands Evergrande Agreement Arrangement, Hong Kong Evergrande and the Space-based Agreement Arrangement were postponed to the evening of October 3, October 5, October 16 and 17 respectively.

Total liabilities reached 1.78 trillion yuan

China Evergrande, whose overseas debt restructuring plan may face major adjustments, is still in an eventful situation.

In addition to the investigation of Evergrande Real Estate, on the evening of September 16, the Nanshan Branch of the Shenzhen Municipal Public Security Bureau issued a "Case Notice", stating that recently, the public security organs took criminal compulsory measures against Du and other suspected criminals such as Evergrande Financial Wealth Management (Shenzhen) Co., Ltd. (hereinafter referred to as "Evergrande Wealth") in accordance with the law. It is reported that as of December 31, 2022, Evergrande Wealth has not paid principal and interest as high as 34 billion yuan.

In addition, on September 19, Evergrande Real Estate added 3 new pieces of information on the enforceees, with a total of more than 980 million yuan in enforcement targets, involving bill recourse disputes. Up to now, the company has more than 590 pieces of information on the enforceees, with a total amount of more than 56 billion yuan, as well as a number of consumption restriction orders, untrustworthy enforceees and final case information.

According to the "2023 Hurun Global Rich List", Xu Jiayin, chairman of the board of directors of China Evergrande, has a net worth of only 20 billion yuan, ranking 1100th in the world, down 712 places from last year. Compared with 2021, Xu Jiayin's net worth at that time was as high as 204 billion yuan, ranking 50th in the world.

On August 27, China Evergrande released an unaudited interim results announcement, signaling that the company's sales were good. In the first half of this year, China Evergrande achieved contracted sales of 33.413 billion yuan, with a contracted sales area of 5.115 million square meters, and a cumulative sales return of 27.1 billion yuan in the first half of the year; as of June 30, China Evergrande had a land reserve of 190 million square meters. In addition, China Evergrande has also participated in 78 old renovation projects, including 55 in the Greater Bay Area and 23 in other cities.

However, from the perspective of financial data, China Evergrande is still mired: in the first half of 2023, China Evergrande's revenue was 128.18 billion yuan, of which the real estate development business income was 120.07 billion yuan. During the period, the operating loss was RMB17.38 billion, the non-operating loss (including litigation, land recovery, equity disposal and asset valuation impairment and other losses) was RMB15.03 billion, and the total net loss was RMB39.25 billion.

In terms of the debt situation that has attracted much attention, China Evergrande disclosed that as of June 30 this year, China Evergrande's total debt was 2.39 trillion yuan, and the debt after excluding contract liabilities of 603.98 billion yuan was 1.78 trillion yuan. These liabilities specifically include borrowings of 624.77 billion yuan, trade accounts payable and other payables of 1.06 trillion yuan (including 596.17 billion yuan of engineering materials payable), and other liabilities of 102.88 billion yuan.

In its unaudited interim results announcement, China Evergrande mentioned that the company has steadily advanced its overseas debt restructuring related work, and signed an overseas restructuring support agreement with creditors in April. The Company obtained approval from the courts of the three jurisdictions to convene a meeting of creditors to advance the restructuring agreement arrangement. The Company was also granted by the High Court of Hong Kong to adjourn the winding-up petition hearing.

Now that China Evergrande is unable to meet the eligibility for the issuance of new notes, and "it is necessary to re-examine the terms of the proposed restructuring to match its objective circumstances and creditors' demands", it is uncertain when its offshore debt restructuring will take place.

Bai Wenxi believes that according to the announcement issued by China Evergrande, the investigation may have a negative impact on the company's market reputation and company image, making the already troubled China Evergrande's efforts to resume operations and debt restructuring work even worse, and it will be more difficult to advance, which will lead to greater resistance to the company's sales and financing and vacation to serve the "guaranteed delivery building", "Although the specific content and results of the investigation are still uncertain, the impact on the company's restructuring and business operations is also self-evident."

In addition to the impact of the investigation, Bai Wenxi believes that the changes in China Evergrande's restructuring plan may also involve deeper reasons. For example, China Evergrande's financial situation is complex, the scale of debt is huge, and the feasibility of the restructuring plan may be quite problematic. In addition, China Evergrande's management may also face adjustments and reforms, which will also have a direct impact on the restructuring plan.

Responsible editor: Zhang Bei Editor-in-chief: Zhang Yuning