Evergrande calculates debt repayment by… issuing new bonds

High-rise apartment complex built by Evergrande real estate group in Jiangsu province, China – Photo: AFP

Evergrande is the world’s most indebted real estate group, with a total debt of more than 300 billion USD, of which 22.7 billion USD of international bonds are almost insolvent after two failures. payment obligations on time by the end of 2021.

Now Evergrande is struggling to repay suppliers, creditors and complete projects. In March, this group said it would announce proposals on debt restructuring by the end of July.

According to sources familiar with the matter, one of the proposals Evergrande is expected to make is to pay off debt (principal and interest) to foreign creditors in the form of new bond issuance. These bonds will then be repaid in cash in installments over a period of 7-10 years.

Foreign creditors are also allowed to swap some of their debt for shares in Hong Kong-listed Evergrande Property Services and Evergrande’s electric vehicle maker Energy Vehicle. It is known that 20% of Evergrande’s foreign debt can be exchanged for shares of these two companies.

However, the new Evergrande’s debt restructuring proposals are in the early stages and are expected to be subject to change.

Evergrande, China’s second-largest property developer, is holding on to debt equivalent to 2% of China’s Gross Domestic Product (GDP). The group is working to raise capital to pay lenders and suppliers and avert a liquidity crunch that could lead to collapse.

Chinese state-owned enterprises have stepped in to help with debt restructuring and take over some of the company’s assets to allay market concerns about disorderly bankruptcy that would affect far-reaching influence on a variety of other businesses not only in China but also around the world.