Evergrande: What does China’s largest debt restructuring look like?

Chinese brokerage firm Evergrande offered hope Wednesday by announcing that it had “eliminated” foreign exchange interest rates because this week, a few days after the crisis in the global market, has come a long way.

But the world’s largest debtor did not say when he would pay and, above all, failed to reconsider his deadline on Thursday in the international agreement.

The developments have only added to the uncertainty surrounding Evergrande’s transformation, an event that could lead to a major debt restructuring in China’s history.

In anticipation of many years due to its many debts, the restructuring of Evergrande could still be a boon for a company whose rapid growth has led to their seat and founding Hui Ka Yan The richest man in China recently in 2017.

It can be politically motivated, as thousands of ordinary people have invested in companies, bought their homes and engaged in similar business.

What does Evergrande have and what does he owe?

All Evergrande papers are approximately Rmb2.38tn ($ 368bn), at the end of June. His business mainly involves buying property from local governments, renovating and selling property to clients before the construction work is completed. The company uses the proceeds from the sale of the loan to finance the purchase of the property.

Evergrande has 778 jobs in more than 223 Chinese cities and business prices ranging from electric car manufacturer to bottled water company.

Its 214m metropolitan area in China was originally valued at Rmb457bn, more than two-thirds in the first and second cities. The company had only Rmb87bn as cash at the end of June.

As a result of its assets, Evergrande’s Rmb1.97tn loans are deep within China. It is indebted to the maritime bank and its creditors and guarantees other financial management matters. In the maritime market, it has about $ 20bn of existing debt.

It also owes money to suppliers and contractors, many of whom have said so took charges against the developer for unpaid fees.

Evergrande did not immediately respond to a request for comment. But as recently as September 13, it said “the latest online allegations about the collapse of Evergrande bank and restructuring are not false”. This month, Hui appeared on a media signature to complete the project.

What does the redesign look like?

The remodeling process can avoid overcrowding and ensure that real estate operations are carried out selling goods that are not really related Reduce losses on creditors.

The S&P’s calculation agency has called for Evergrande infidelity was “probably”, with the company for repaying interest rates on Thursday dollars, and that Beijing is seeking a “systematic loan restructuring that increases the value of its assets”.

Ron Thompson, an expert on restructuring at Alvarez & Marsal, said a creditors’ committee would be formed, in which different creditors would be able to make decisions through a majority of votes.

China Fortune Land Development, a Hebei manufacturer that collapsed in February, for example, has a credit committee headed by Ping An, China’s largest insurance company, who took a $ 3.2bn hit from the payment you missed.

If a creditor starts bankruptcy in Evergrande, he or she must force the court to approve the order. The company will have six months to develop a legal restructuring plan in China, a deadline that could be given for an additional three months.

However, the difficult question for debtors in Beijing and Evergrande is whether there is enough time to “prepare” for the restructuring of the past, says Ian Chapman, a colleague of Allen & Overy’s Hong Kong rehabilitation and healing team.

The continuation of its construction projects is essential not only for the survival of Evergrande but also for homeowners who have already paid for the houses under construction.

Wei He at Gavekal Dragonomics said completing the project is very important for Beijing. “The easiest way to do this is for other developers to get involved and complete the project and use the real estate loan to repay the loan,” he said.

How can the government get involved?

When traders were selling to Evergrande’s headquarters in Shenzhen last week demanding a refund, their sexually explicit images were distorted in Chinese media.

While the central government wants to end any disruption, the S&P did not expect to provide any support to Evergrande “unless the stability of the system is at stake”. The census agency says the intervention will undermine a senior campaign, launched last year, to reduce debt to the most developed.

Mr Thompson of Alvarez & Marsal said Beijing’s idea of ​​such a place was “first person”.

Local governments work closely with local developers, who rely on them to raise funds for real estate and economic developments. Evergrande’s manager at distributing metal told the Financial Times that the company has been submitting plans to the central government since February, but no one has been accepted.

Evergrande officials have said that the “final solution” was for local governments and senior government officials to work for the “district by state” party.

Jack Rodman, a reformer who has worked with Chinese financial management companies as an accountant, acknowledged that the regional approach was “very possible”.

Who can lose a chance?

The global stock market is seriously undermining Evergrande’s debt, with bonds growing next year selling at least 30 cents per dollar.

But the losses for investors depend on the price they bought. A UBS letter sent to customers last week explaining why its costs are high he continued to hold the chains he added that Evergrande’s loan was “selling at a lower or lower price”.

In the past, foreign trade organizations have been severely affected by failures in companies such as the Peking University Founder Group. An S&P retrospective analysis of nearly 50 failed bankers in China showed that the percentage of debt repayment for debtors was 23.7%.

The deeper question is what does a higher renovation mean in terms of consumer confidence in a economy in which direct or indirect home sales make up about 28% of cases.

“Housing suspensions should be reduced,” the Evergrande official said, “otherwise the economy will be depleted.”

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