Evergrande Shares Plummet as Debt Restructuring Plans Fall Apart

• Evergrande shares under massive pressure
• Restructuring plans failed
• Investigations against subsidiaries prevent borrowing

With a final discount of 21.82 percent to HKD 0.430, shares in the real estate group Evergrande were among the biggest losers on the Hong Kong stock exchange on Monday.

Ongoing problems with debt restructuring

The company previously said it was unable to take out new loans due to an ongoing government investigation. Specifically, Evergrande had to scrap a $35 billion debt restructuring plan that was intended to ensure the company’s survival.

Since 2021, the heavily indebted real estate developer had been working to convince creditors of the debt restructuring plan following its default. Specifically, Evergrande had suggested offshore creditors convert the current outstanding debts into new ones Bonds with terms of between ten and twelve years. The company’s bondholders eventually reached an agreement to take stakes in some of Evergrande’s offshore subsidiaries in return for a debt write-off. But the situation had become increasingly dire in recent weeks: As Reuters reported, the struggling property developer announced late on Sunday that it was unable to due to ongoing investigations into its main domestic subsidiary, Hengda Real Estate Group Co Ltd. take on new debt, which will destroy the debt plan. The subsidiary was investigated by China’s securities regulator last month on suspicion of an information disclosure violation.

“The debt restructuring plan is now stuck and cannot be moved forward,” Reuters quoted Steven Leung, sales manager at UOB Kay Hian in Hong Kong, as saying. “Other options, such as converting the debt into shares in other listed entities, are also currently considered unworkable.”

The situation around China’s real estate markets is getting worse

Evergrande had already stated in a securities prospectus filed on Friday that it had to abandon its restructuring plan due to worse-than-expected real estate sales and that it would look for another path that “reflects the company’s objective situation.” Evergrande also said it has begun initial discussions about renegotiating the debt restructuring plan with its creditors, including Chinese banks and international bondholders. Without a new agreement, the bondholders who loaned Evergrande around $15 billion could seek a liquidation of the company, putting further pressure on China’s already struggling real estate market.

Editorial team finanzen.net with material from Reuters and Dow Jones Newswires

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