Evergrande’s overseas creditors have agreed that existing bonds can be replaced with new ones that will be interest-free for the first three years, the Shenzhen-based company said in a filing to the Hong Kong Stock Exchange yesterday.

The new bonds will have a term of between four and 12 years with an annual interest rate of between 2 percent and 7.5 percent, it said. The interest and 0.5 percent of the principal will start to be paid in the fourth year, it said.

If Evergrande succeeds in restructuring its foreign debt, there will no longer be a risk of the developer being liquidated by the Hong Kong courts, it added. Evergrande received a winding-up petition in June last year and the hearing, which has been put off three times, has now been deferred until July 31.

Market players are watching Evergrande very closely as, should it succeed, it will probably be the largest debt restructuring ever among Chinese firms.

Evergrande has overseas liabilities of around USD21.7 billion, which include USD14.2 billion in overseas bonds, USD5.2 billion in foreign debt held by one of its subsidiaries and USD3.3 billion in placements and project financing, Executive Director Xiao En said last year.

The firm had estimated total liabilities of CNY2 trillion (USD292.8 billion) as of June 30, 2021, including CNY576 billion of interest-bearing debt, and has been unable to pay off its debts since the fourth quarter of last year.

For the next three years, Evergrande will focus on delivering pre-sold housing, which is still under construction, on time and try its best to resume normal and orderly operations, it said. The developer said it will need another CNY250 billion (USD36.6 billion) to CNY300 billion to carry out these obligations.

If operations return to normal in the fourth year, Evergrande should be able to generate unleveraged cash flow of between CNY110 billion (USD16.1 billion) and CNY150 billion a year for the next 10 years, it added.

The firm continues to soldier on. Evergrande logged CNY6.6 billion (USD966.9 million) in sales in the first two months with a transaction area of 911,000 square meters. Its NEV unit China Evergrande New Energy Vehicle Group has delivered over 900 Hengchi 5 electric vehicles since it started mass production in October 2022 and its property management arm Evergrande Property Services Group posted gross profit of CNY4.2 billion (USD615.3 million) in 2021 and revenue of CNY14.6 billion.

Guangdong province will continue to push forward with the resolution of Evergrande and other real estate firms’ debt risks according to market principles and the rule of law, an official from the provincial government said in January last year. Evergrande said later that it has engaged an intermediary organ to assist it in resolving risk.

Evergrande, Evergrande Property Services and Evergrande NEV were suspended from trading in March 2022 for failing to submit their annual financial reports on time and have yet to resume trading.

Editor: Kim Taylor