FILE PHOTO: The company logo is seen on the headquarters of China Evergrande Group in Shenzhen, Guangdong province, China September 26, 2021. REUTERS/Aly Song
January 21, 2022
By Brenda Goh and Clare Jim
SHANGHAI/HONG KONG (Reuters) -China Evergrande Group on Friday said it was hiring more financial and legal advisers after a group of international creditors said it would take “enforcement action” if the property developer did not do more to resolve a debt default.
Evergrande is the world’s most-indebted property company with more than $300 billion in liabilities, including nearly $20 billion of international bonds all deemed to be in default after a run of missed payments late last year.
Its financial situation has roiled other Chinese property developers over the past year and exacerbated a funding squeeze in the sector – an example of which was last week’s failed attempt to sell bonds by rival Country Garden Holdings Co Ltd. Still, in a positive sign, it surprised the market on Friday with a new issue of $500.2 million convertible bonds.
In a filing to the stock exchange, Evergrande said it was proposing to engage China International Capital Corp Ltd and BOCI Asia Ltd as financial advisers, and Zhong Lun Law Firm LLP as legal adviser.
That came a day after an offshore creditor group, represented by law firm Kirkland & Ellis and investment bank Moelis, said it was ready to take “all necessary actions” to defend members’ rights after what it said was Evergrande’s a lack of engagement.
Evergrande earlier asked offshore bondholders to disclose holdings, showed a letter seen by Reuters on Friday. The developer is seeking replies by mid-next week to identify investors for communications, to aid debt restructuring.
Evergrande’s share price fell 0.6% on Friday. Its April 2023 U.S. dollar bond traded at 12.551 cents on the dollar, data by Duration Finance showed, bouncing after Evergrande’s Friday filing though still softer than overnight.
SIGNS OF IMPROVEMENT
Stocks and bonds of Chinese property developers have gained this week on hopes a slew of recent government measures would help ease the sector’s funding squeeze and reverse a slump in construction, a key economic growth driver.
Country Garden, China’s biggest property developer by sales, said it would issue HK$3.9 billion of convertible bonds to refinance debt that will become due within one year.
The bonds, due July 2026 and puttable in Jan 2024, carry 4.95% interest and have an initial conversion price of HK$8.10 per share. At full conversion, the shares would represent 2% of enlarged capital.
Shares of Country Garden dropped nearly 3% to HK$6.76, while its January 2023 international bond rose to 97.825 from 92.787 overnight.
The new issue followed a report that the developer failed to find appetite for a potential $300 million convertible bond last Wednesday. IFR reported Country Garden tested the waters for a three-year puttable deal which would carry a yield-to-maturity of 4.75% and a conversion premium of 25%.
BUYING TIME
The government unexpectedly cut borrowing costs on its medium-term loans on Monday for the first time since April 2020 to ease pressure on the cooling economy. On Thursday, it cut its benchmark lending rates for corporate and household loans for a second consecutive month and also lowered its mortgage lending benchmark rate.
Reuters reported on Wednesday that policymakers were also drafting nationwide rules to make it easier for developers to access funds from sales still held in escrow accounts, which would improve their short-term liquidity and buy time to repay debt.
($1 = 7.7886 Hong Kong dollars)
(Reporting by Brenda Goh in Shanghai and Clare Jim in Hong Kong; Editing by Christopher Cushing and Kim Coghill)
