China Evergrande has proposed a new debt restructuring plan, offering offshore bondholders a 30% equity stake in the developer’s two Hong Kong-listed subsidiaries. This plan could result in significant losses for bondholders, as Evergrande’s dollar bonds last traded at around 2.25 cents on the dollar. The renewed proposal is part of Evergrande’s efforts to survive and avoid liquidation, as a Hong Kong court ordered the company to create a concrete debt restructuring plan ahead of a liquidation hearing scheduled for December 4.
The new plan was introduced after Evergrande’s original debt restructuring plan faced setbacks due to its founder’s investigation for suspected criminal activities. The revised proposal will need approval from Chinese regulators and is seen as critical to Evergrande’s future. While the ad hoc group of bondholders originally supported the old plan, they are reportedly unhappy with the revised terms offering equity in the Hong Kong-listed subsidiaries. The success of this proposal hinges on convincing creditors and shareholders of the two Hong Kong-listed units to accept the new terms.