Evergrande, a troubled Chinese real estate behemoth, has unveiled plans to restructure $20 billion in offshore debt, which might serve as a template for other suffering developers.

According to the company, the actions will aid in “efforts to resume operations and settle concerns on shore”.

Evergrande defaulted on its loans in late 2021 and has more than $300 billion in liabilities.

Traders are alarmed by the turmoil and worry that the property market in China will catch on.

“The proposed restructuring complies with international restructuring norms and best practices,” Evergrande said in a statement to the Hong Kong Stock Exchange on Wednesday.

The company went on to say that it would “make every effort to restore a healthy ecosystem of capital and business, repair its capital structure, and stabilize its business operations.”

The plan calls for creditors to exchange Evergrande bonds for new bonds and equity-linked investments secured by the corporation and two subsidiaries listed on the Hong Kong Stock Exchange.

Evergrande announced earlier this week that a significant number of offshore bondholders had approved the deal.

Before the restructuring on October 1st, it intends to request the consent of additional bondholders by the end of this month.

In the upcoming months, the corporation will also make its past-due 2021 and 2022 financial reports available.

The trading of its shares, which are listed in Hong Kong, will remain halted at this time.

Evergrande, the most indebted real estate developer in the world, was once the most popular developer in China. By borrowing more than $300 billion, the company quickly expanded to become one of China’s largest corporations.

Chinese authorities did, however, enact new regulations in 2020 to limit the debt owed by significant real estate developers. Due to this, Evergrande decided to market its properties at steep discounts in order to assure that revenue would keep the company afloat. Since then, it has had difficulty making loan interest payments.

Evergrande missed a critical deadline in December 2021 and failed to pay interest on about $1.2 billion in foreign loans. Evergande was deemed in default by major credit rating agencies, which could stymie negotiations for a restructure with investors.

Due to a severe cash shortage and a faltering economy, China’s real estate market is under pressure. The second-largest economy in the world depends on it for around a third of its economic production.

(Adapted from BBC.com)

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