Evergrande shares rise despite mounting uncertainty over debt revamp plan

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Evergrande faces liquidation threat from offshore creditors

China Evergrande Group’s shares rose nearly 4% in early trading on Wednesday after their sharp recent declines. The rise came despite growing uncertainty about the cash-strapped developer after Reuters reported that some of its offshore creditors were planning to join a liquidation court petition filed against the company if it does not submit a new debt revamp plan by end of next month.

Evergrande’s Hong Kong-listed shares opened down 3.8% at HK$0.38, but reversed losses and were up nearly 4% in early trade. The stock is still off nearly 25% since Monday after Evergrande said a day earlier it could not issue new bonds as part of its debt restructuring plans because of a regulatory investigation into its main Chinese unit.

The unit, Hengda Real Estate, then said on Monday it had failed to pay the principal and interest for a 4 billion yuan ($547 million) bond due by Sept. 25.

According to Reuters, some of Evergrande’s offshore creditors have hired lawyers and are considering joining a liquidation court petition filed by a trust company in the Cayman Islands, where Evergrande is registered, if the company does not submit a new debt revamp plan by Oct. 31.

The petition, filed by Strategic Turnaround Trust, seeks to wind up Evergrande and appoint liquidators to recover the trust’s investment in a $1.5 billion bond issued by Evergrande in 2018.

Evergrande’s debt woes rattle global markets and China’s economy

Evergrande, once China’s top-selling property developer, has been struggling to repay its massive debt of over $300 billion, which has sparked fears of a contagion effect on the global financial system and China’s economy.

Evergrande shares rise despite mounting

The company has been scrambling to sell assets, negotiate with creditors, and raise funds to avoid a default, but has faced multiple legal challenges, regulatory hurdles, and public protests from angry investors, suppliers, and homebuyers.

Evergrande’s debt crisis has also weighed on China’s property sector, which accounts for about a quarter of the country’s gross domestic product and is a key driver of growth and employment.

The Chinese government has tightened regulations on the sector in recent years to curb excessive borrowing, speculation, and environmental damage, but has also signaled that it will not bail out Evergrande or other troubled developers.

Analysts have warned that a disorderly collapse of Evergrande could trigger a sharp slowdown in China’s economy, which is already facing headwinds from the COVID-19 pandemic, trade tensions, and power shortages.

Evergrande’s fate hinges on debt restructuring plan

Evergrande has said that it is working on a debt restructuring plan with its creditors and advisers, and that it hopes to reach an agreement as soon as possible.

However, the details and timeline of the plan remain unclear, and some creditors have expressed doubts about Evergrande’s ability and willingness to honor its obligations.

Evergrande has also said that it is in talks with potential investors to sell some of its assets, such as its electric vehicle and property services units, but has not announced any concrete deals yet.

The company has also sought to reassure its customers that it will deliver the homes they have paid for, and has pledged to resume construction work on some of its unfinished projects.

However, some homebuyers have reported delays, cancellations, and quality issues with their purchases, and have staged protests across China to demand refunds or compensation.

Evergrande’s fate now depends on whether it can reach a satisfactory debt revamp plan with its creditors, and whether it can restore confidence among its customers, investors, and regulators.

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