China’s property crisis: Evergrande, Shimao and other fallen tycoons rush for lifelines to fix US$232 billion debt headache
- China Evergrande stretches patience among creditors after two years of swimming in rising debt tide before unveiling its workout plan this week
- Other debt-stricken developers are putting March 31 as a marker after many false starts
The rush is on.
China Evergrande’s Hui Ka-yan and his beleaguered industry peers have set March as a key target. By the end of the month, they want to have a done deal with their creditors, or at least have something to show. If not, they could miss Beijing’s lifeboat for the sector and lose any remaining goodwill among creditors over the crisis that has simmered for two years.
Hui, the man behind the world’s most-leveraged builder, had many analysts and creditors staying up late on Wednesday night. The company dropped an announcement at 11pm on a plan to reorganise more than US$19 billion of offshore debt. The grim alternative is a liquidation, with only 2 to 9 per cent recovery for every US$1 owed.
Evergrande wants to win bondholders’ support by March 31. Creditors, including hedge funds preying on the market distress, are likely to agree and ride the recovery wave to extract more upside from more than US$100 billion pile of defaulted debt in the property sector.
“The quicker they solve their defaults, the quicker that they’ll be able to access some of those supportive policies onshore,” said Brandon Gale, head of Houlihan Lokey’s restructuring group in Asia, which advises some distressed developers including Evergrande. There will be more restructuring progress this year because of “a dramatic change in the developers’ attitude”, he added.
