China Evergrande Wants To Delay Early Redemption Of $700 Million Onshore Bonds

Aerial view of buildings on Ocean Flower Island, or Haihua Island, an artificial archipelago built … [+] by the Evergrande Group, on November 29, 2021 in Danzhou, Hainan Province of China.

Zhu Bo/VCG via Getty Images

China Evergrande has started the new year by reaching out to some of its onshore bondholders in an effort to convince them not to exercise their right to demand early repayment of the company’s bonds. 

Evergrande’s main onshore unit, Hengda Real Estate, will hold a meeting online from January 7 to 10 with holders of its 4.5 billion yuan ($706 million) 6.98% bond due 2023, according to a filing to the Shenzhen Stock Exchange. It wants to postpone an option that allows them to exercise a put on the bonds that would require Evergrande to acquire the securities on January 8, or this weekend.

The move comes as Evergrande’s billionaire founder Hui Ka Yan continues his struggle to salvage the once sprawling real estate company. Earlier, he sold personal assets such as private jets and luxury apartments to inject about $1 billion in cash into Evergrande, which is still close to collapsing under more than $300 billion in total liabilities. Later, Evergrande defaulted on other payments towards the end of last year, and is widely expected to officially enter a prolonged debt restructuring process this year.

Meanwhile, the company disclosed yesterday in a filing to the Hong Kong Stock Exchange that it had been ordered by the Danzhou government in Hainan province to demolish 39 buildings on its Ocean Flower Island project.

The island, in fact, is a man-made archipelago that took Evergrande more than a decade to build and is now being promoted as a culture and tourism resort with hotels, convention centers, botanical gardens and residential complexes, according to its official website.

Evergrande said the demolition order only concerns one plot of land, and doesn’t involve other parts of the project. It didn’t elaborate on the reasons behind the demolition order, but a December document published via the local government’s website has singled out the entire project for harming the ocean ecosystem, in particular for damaging coral reefs. Repairing the coastline would cost close to 80 million yuan ($13 million), the document shows.

An Evergrande spokesperson said the company had no further comment. Evergrande’s filing said that it would “actively communicate” with the authorities and “resolve the issue properly.”

Still, the government order is likely to cause further damage to already fragile homebuyer confidence. The company barely sold any apartments in the final months of 2021, after its financial crisis became widely publicized.

Evergrande said in the aforementioned filing that it had achieved 443 billion yuan ($69.5 billion) in contracted sales last year. The number barely changed from results published in October, when the company claimed to have already reached 442.3 billion yuan in contracted sales. In 2020, Evergrande signed contracts to sell 723.3 billion yuan worth of properties.