HONG KONG--China Evergrande Group is considering repaying offshore public bondholders owed around $19 billion with cash instalments and equity in two of its Hong Kong-listed units, two sources said, as the world's most indebted developer struggles to emerge from its financial crisis.
Evergrande's entire $22.7 billion worth of offshore debt including loans and private bonds is deemed to be in default after missing payment obligations late last year. It said in March that it will unveil a preliminary debt restructuring proposal by the end of July.
As part of the proposal, Evergrande is looking to repay offshore creditors the principal and interest by turning them into new bonds, which will then be repaid in instalments over a period of seven to 10 years, said one of the sources.
Offshore creditors also will be allowed to swap a portion of their debt into stakes in the developer's Hong Kong-listed property services unit, Evergrande Property Services Group, and electric vehicle maker China Evergrande New Energy Vehicle Group Ltd, said the two sources.
The first source said up to 20% of the offshore debt can be swapped into equities of those two units. The restructuring proposals are, however, at an early stage and are subject to change, the source added.
Both the sources declined to be identified as they were not authorised to speak to the media.
Evergrande, once China's top-selling developer, set up a risk management committee in December made up mostly of members from state enterprises, as the Guangdong provincial government is leading the restructuring. Evergrande and the Guangdong provincial government did not respond to Reuters request for comment. Investment bank Moelis & Co declined to comment, while law firm Kirkland & Ellis did not respond. Moelis and Kirkland are advisers to a group of Evergrande offshore bondholders.
Evergrande is reeling under more than $300 billion in liabilities and has become the poster child of the country's property sector crisis as it lurched from one missed payment deadline to another. The developer's woes quickly led to a wave of defaults in China's property sector, a key pillar for the world's second-largest economy, rattling investors and leading to a slump in home sales and firms struggling to access funding.
Evergrande has also struggled to repay suppliers and complete housing projects. While state intervention has quelled market concern over a disorderly collapse of the company, investors are still in the dark over whether they will recoup their money.
