Evergrande Onshore Creditors Reject Extension of RMB 4.5B Bond

Debt holders have denied a request by China Evergrande’s primary onshore unit to delay repayment of a RMB 4.5 billion ($670 million) bond, turning up the heat on the world’s most leveraged developer as it faces a winding-up threat in Hong Kong.

The first-ever rejection of an Evergrande onshore bond extension was announced Monday by the unit, Hengda Real Estate Group, in a filing with the Shenzhen Stock Exchange.

The onshore bond had become puttable, meaning entitled to early redemption, on 8 January of this year. Evergrande obtained a six-month delay at the time, but a similar proposal this month was turned down.

“Evergrande will continue to actively negotiate with bondholders based on the basic premise of not evading and revoking debts,” the Guangdong-based builder said in Monday’s filing.

Fall From Grace

Evergrande reigned as China’s top developer from 2016 to 2020, but the group chaired by Xu Jiayin dropped to 32nd place in the first half of this year with contracted sales of RMB 22.2 billion — about one-fifteenth of the year-earlier figure.

While China’s real estate sector has been in a down cycle since the end of 2018, Evergrande and other private sector developers that relied on high-leverage business models have been hit the hardest after Beijing introduced the “three red lines” policy in August 2020 to restrict borrowing.

The embattled Evergrande rattled global markets last September by warning of impending defaults on its debts, and the crisis soon spread to other major property players such as Kaisa Group, Fantasia Holdings, Sinic Holdings and Sunac.

Saddled with the equivalent of $300 billion in liabilities, Evergrande has been asking for reprieves from both its local and foreign lenders. The group has been working with creditors on a restructuring scheme for its $19 billion in offshore debt, with a preliminary plan due to be announced before the end of July.

Battle Moves to Courts

In late June, an investor in Evergrande’s Fangchebao online platform filed a winding-up petition before the high court of Hong Kong in a bid to liquidate the real estate giant.

Top Shine Global Limited, which is owned by 29-year-old investor Lin Ho Man, had invested HK$750 million ($95 million) in the online platform in March 2021, according to a stock filing at the time.

Evergrande sold 10 percent of the shares in Fangchebao, with Lin buying a 0.46 percent stake for HK$750 million and acting as the guarantor for another investor, Triumph Roc International, which invested the same amount.

Under the agreement, the developer was supposed to repurchase the shares at a 15 percent premium if a Hong Kong IPO for Fangchebao did not materialise within a one-year period. An appeal is scheduled to be heard on 31 August.

“The company will oppose the petition vigorously,” Evergrande said in a filing last month, assuring that “the company does not expect that the petition will impact the company’s restructuring plans or timetable”.