Evergrande Proposes Six-Month Extension for Repayment of 800 Billion Yuan Bonds

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Cho Hyun-ui] Evergrande, which has fallen into an official default status due to failure to repay offshore dollar bonds, has requested bondholders to postpone the repayment date of soon-to-mature yuan-denominated bonds by six months.

According to economic media outlet Caijing on the 6th, Evergrande notified bondholders of plans to hold a meeting of the '20 Evergrande 01' yuan bondholders.

The meeting is scheduled to take place from the 7th to the 10th, with the agenda being to postpone the bond repayment date originally set for January 8 to July 8, six months later.

Issued in China in January 2020, this bond amounts to 4.5 billion yuan (approximately 845 billion KRW). It is originally a 3-year maturity bond but includes an option clause allowing early repayment after 2 years.

Industry insiders weigh in on the expectation that the Chinese bondholders, heavily influenced by authorities, will agree to Evergrande's request for maturity extension.

After Evergrande failed to pay $82.5 million (approximately 99 billion KRW) in interest on dollar bonds due by the 6th of last month, entering official default status, Chinese authorities have effectively taken direct control of the company by sending Guangdong provincial government officials and state-owned enterprise representatives into Evergrande.

Chinese authorities prioritize relief for Evergrande construction site workers and homebuyers over bondholders both inside and outside China.

Therefore, amid Evergrande's ongoing liquidity crisis, limited resources are intended to be allocated first to normalizing construction sites rather than repaying credit bonds.

Especially with the Lunar New Year holiday at the end of this month, when a large number of migrant workers from rural areas return home, authorities urgently need to resolve unpaid wages to maintain public stability.

According to Nomura Securities, the total unpaid wages owed by Evergrande and other Chinese real estate companies to construction site migrant workers are estimated at 1.1 trillion yuan (approximately 207 trillion KRW).

With active support from authorities, operations at Evergrande construction sites across China have reportedly resumed to a significant extent.

Evergrande Chairman Xu Jiayin stated in a New Year's message to employees on the 1st that the construction resumption rate reached 91.7%, and that 53,000 housing units were completed and delivered to customers in the fourth quarter.