'Default Crisis' Evergrande Launches Risk Resolution Committee

[Image source=EPA Yonhap News]

[Asia Economy Reporter Cho Hyun-ui] There are speculations that Evergrande, a Chinese real estate developer that has officially signaled a default crisis, may soon attempt debt restructuring negotiations with its creditors.

On the 6th (local time), Bloomberg News reported, citing anonymous sources, that Evergrande plans to include all offshore debts, including all public bonds and private bonds, in what will become the largest debt restructuring in China.

The debt restructuring target reportedly includes public bonds issued by Evergrande affiliate Jingcheng and $260 million bonds issued by related company Juxiang, guaranteed by Evergrande.

Earlier on the evening of the 6th, Evergrande announced that it had launched a Risk Resolution Committee including external experts. The market interprets this as a sign that Evergrande’s debt restructuring process is approaching.

Bloomberg News added, "However, the official debt restructuring process has not yet started, and the specific details of the plan are subject to change."

The market expects that Evergrande, which has already signaled the possibility of default, will engage with creditors in the future to negotiate debt restructuring such as bond maturity extensions.

In a disclosure warning of default risk on the night of the 3rd, Evergrande stated that it plans to actively communicate with creditors to restructure offshore debt.

As of the end of June, Evergrande’s total debt stood at 1.9665 trillion yuan (approximately 365 trillion won), of which the amount of dollar bonds issued offshore is about $19.2 billion (approximately 22.7 trillion won).

While domestic bonds in China can be relatively easily restructured if the Chinese authorities are willing to intervene, the situation is more complicated for offshore bonds.

The market expects that Chinese authorities, hoping to minimize the fallout from the Evergrande crisis and to complete over 1,300 construction projects across 280 cities, may play a more active role in the debt restructuring process after some defaults occur.

In a recent report, Morgan Stanley forecasted, "The authorities will first try to negotiate and coordinate with domestic creditors to secure funding necessary for the completion of Evergrande’s real estate development projects, and once business operations stabilize, they will facilitate debt restructuring discussions between Evergrande and offshore creditors."

Following the announcement of Evergrande’s default risk, the Guangdong provincial government deployed a task force to Evergrande to actively intervene in the situation.

If Evergrande fails to pay $82.49 million (approximately 97.6 billion won) in dollar bond interest by the 6th, it will officially default, but no official announcement has been made yet.

This content was produced with the assistance of AI translation services.