By HUANG Yu

Evergrande Group, China’s most-penurious real estate giant, has finally come up with a reconstruction plan, following delay after delay.

By the end of 2022, Evergrande had more than US$100 billion in debt. A grand total of 754 billion yuan (US$110 billion) owed sees the company needing to find more than 140 billion yuan to satisfy offshore creditors.

New debt for old

On late Wednesday night, Evergrande solemnly rolled out the multi-billion-dollar monolithic plan of action. Part of this plan demands that offshore creditors swap their debt for securities: newly issued securities.

Evergrande has offered creditors two options. One is to replace existing debt with new bonds maturing in 10 to 12 years or with new 5 - 9 year notes. The other suggestion is that creditors swap offshore debt for a variety of shares in Hong Kong-listed companies. These companies are all part of the Evergrande Group. Evergrande Property Services, China Evergrande New Energy Vehicle Group, or even China Evergrande itself are all up for grabs.

If the plan fails and Evergrande is forced to liquidate, the recovery rate for unsecured offshore creditors would range from 2.1 to 9.3 percent, the company said.

Evergrande has placed a lot of hope in the offshore debt restructuring plan, and very little else. The board seems to be convinced that all this word juggling will entice onshore creditors to reach agreements with the company, and then everything will roll along as per usual. Normal business operations will be resumed. 

Many days in court to come

By the end of last year, Evergrande had 208 billion yuan of overdue onshore debt and delinquent acceptance bills amounting to 326 billion yuan.

Some creditors have already taken legal action. In terms of lawsuits, Evergrande is facing around 800 legal cases and the number grows almost every day. The amount of money for each one is around 100 million yuan.

Should the restructuring plan work out, Evergrande will still have a long way to go before it does anything like “resume normal operations.” At the end of 2021, before the worst of the disaster became known, the company had only 2 billion yuan in its bank account.

In order to meet its own home deliverance targets, Evergrande is going to need to raise at least 250 billion yuan. The company said that if the plan goes well, from 2026 Evergrande will have an annual cash flow of 110 million yuan to 150 million yuan, which is certainly a pleasing thought.

End of the road

Evergrande also said its auto-making unit will be forced to halt operations if no liquidity is injected. The company formerly known as a real estate developer has squandered 50 billion yuan on building an EV ecosystem.

Earlier this week, Evergrande EV partner, Swedish electric car manufacturer NEVS announced a plan to sack around 320 workers – 94 percent of the workforce – over the next six months. NEVS is wholly-owned subsidiary of Evergrande.