China Evergrande Group told creditors it aimed to have a preliminary restructuring proposal in place within six months on Wednesday, in its first direct communication with them since the property giant's finances began to unravel last year.
Once China's top developer, Evergrande has racked up debts of more than $300 billion and is struggling to repay creditors, suppliers and investors in wealth management products.
$20 Billion of Int'l Bonds in Default
It missed some dollar bond payments last month, sparking calls for talks, and nearly $20 billion of its international bonds are now deemed to be in default.
Evergrande's newly-appointed executive director Siu Shawn, who is also chairman of Evergrande New Energy Vehicle Group Ltd, said on the call the group was working on a comprehensive restructuring plan, which it aimed to propose within six months, adding that it hoped to work with creditors to achieve a risk management solution.
"The board of directors and the risk management committee look forward to having further communications with investors and respectfully request (them) not to take any aggressive legal actions in order to maintain stability for the mutual benefits of all stakeholders," Siu said on the call.
"We noticed there are doubts about the transparency and the restructuring process of the group, we'd like to take this opportunity to explain to all creditors that the board of directors, the risk management committee and the group will work expeditiously to stabilize the group operation."
In a stock exchange filing shortly after the call, the developer said it would continue to listen carefully to the opinions and suggestions of creditors.
Some bondholders said they were disappointed by the call, which they said lacked insight on Evergrande's plans.
"(I had) no expectation prior to the call and no expectation after the call....Frankly speaking, I believe the final decision making is led by the government, the company is relatively passive," said one offshore bondholder in Evergrande.
The bondholder declined to be named as he was not authorized to speak to the media.
Evergrande Looks to Buy More Time
Evergrande had on Monday sought more time from its offshore bondholders to work on a debt restructuring plan, after a group of creditors said they were ready to take "all necessary actions" to defend their rights.
The company's debt crisis has engulfed other Chinese developers, roiled global financial markets in the past year and contributed to a slump in China's property market, which accounts for a quarter of its economy.
A member of the developer's risk management committee, Chen Yong, also joined the 25-minute call which included prepared answers to questions, the participant added.
Chen is a compliance director of state-owned Guosen Securities. Andrew Huang, Evergrande's Hong Kong branch general manager, was also be present on the call, said the participant, declining to be named due to confidentiality constraints.
Evergrande set up the risk management committee in December with mostly members from state enterprises, as the Guangdong provincial government is leading work on its restructuring.
"The call turned out to be disappointing. Not that I was expecting any fireworks, but still some insights on business would have been useful. Six months is a long time for (a) draft restructuring plan," Himanshu Porwal, an EM credit analyst at Seaport Global, said.
Asks for Bondholders' ID
Evergrande has also asked the bondholders to disclose their holdings by the middle of this week to identify investors for communications, and hired more financial and legal advisers to follow up on creditor demands.
Shares in Evergrande closed up 1.7% on Wednesday, while its defaulted dollar bond due April 2022 dropped to 15.997 cents on the dollar from 17.074 overnight, Duration Finance data showed.
Rating agency Moody's said in a report on Wednesday that covenant packages in Evergrande's offshore issuance had become increasingly lax, loosening or eliminating key protections, and putting the recovery prospects for offshore creditors in peril.
Offshore bondholders rank behind the creditors of Evergrande's more than 1,950 onshore subsidiaries, Moody's added, none of which guarantee the dollar bonds.
Moody's said weakened covenants and increased debt carve-outs had allowed Evergrande to increase leverage materially.
"Flexible covenants have left Evergrande and other Chinese property developers with a corporate family rating of B3 negative and below vulnerable to the highly cyclical nature of China's real estate market," Jake Avayou, a Moody's vice president and senior covenant officer, said.
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