by Xie Yu, Julie Zhu and Clare Jim
HONG KONG (Reuters) – Real estate group China Evergrande Group plans to repay around $19 billion (17.7 billion euros) in debt to foreign creditors through cash installments and shares in two of its listed subsidiaries on the stock market to try to get out of its financial difficulties, two sources familiar with the matter told Reuters.
Evergrande, in default on its $22.7 billion in offshore debt, announced in March that it would unveil a preliminary restructuring plan by the end of July.
According to one of the sources, the group is seeking to repay its foreign creditors by converting their debts into new bonds, which will then be repaid in installments over a period of seven to ten years.
Bondholders will also be allowed to exchange part of the debt claim for shares in the capital of Evergrande Property Services, the Hong Kong-listed property services division, and China Evergrande New Energy Vehicle, the group’s electric vehicle subsidiary. said the two sources.
One of the sources clarified that up to 20% of offshore debt can be exchanged for shares of these two branches, adding that the restructuring proposals were, however, at a preliminary stage and could be modified.
Evergrande, a former top real estate developer in China, set up a risk management committee in December made up mainly of members from state-owned companies and the government of Guangdong province, where its headquarters are located.
Evergrande and the Guangdong government did not respond to Reuters’ request for comment.
Two holders of Evergrande bonds abroad said they were more inclined to choose the conversion of debt into equity, judging it unlikely that the group would be able to fully honor the repayment of debts in cash even in a staggered manner.
The developer’s troubles soon led to a wave of defaults in China’s property sector, a key pillar of the world’s second-largest economy, a slump in home sales and corporate financing difficulties.
Evergrande shares, Evergrande Property Services and Evergrande New Energy Vehicle have been suspended for about two months. Their financial results for 2021 have not been released as audit work is still ongoing.
(Reporting Xie Yu, Julie Zhu and Clare Jim; French version Laetitia Volga, editing by Kate Entringer)