HONG KONG: China Evergrande Group's debt restructuring proposal, a test of investor sentiment towards the battered property sector, failed to impress because of its long repayment period and lack of enough sweeteners, creditors and analysts said.
Evergrande is the world's most indebted developer with around $300 billion in liabilities. Its debt restructuring, the country's biggest such exercise, is aimed at saving it from a disorderly collapse.
The developer has $22.7 billion of offshore debt, all of which is deemed to be in default. The plan provided two main options to its dollar bondholders to recoup their investments.
Creditors can either swap all of their holdings into new notes with maturities of 10 to 12 years, or convert them into different combinations of new notes with tenors of five to nine years and equity-linked instruments.
The outcome of Evergrande's debt revamp plan is likely to have a bearing on similar proposals being worked on by a string of other Chinese developers that have defaulted on repayment obligations in the last year.
The move also comes amid Beijing's efforts to stabilise its liquidity-crisis hit property sector, which account for roughly a quarter of its economic output, as part of its efforts to bolster growth.
An index tracking mainland-based property developers slipped 0.9% by early afternoon trading on Thursday, while the broader stock benchmark index added 1%.
"Overall we are not very satisfied with it, since there is no more credit enhancement and the new tenors are too long," Sunny Jiang, head of fixed income investment with Haitong International Asset Management Ltd, said of the Evergrande plan.
"If this plan gets passed, we worry it might set a bad example for other developers mulling their restructuring proposals, and it might be even more challenging for bondholders to recoup their investment," he added. Some bondholders have been pushing Evergrande to sweeten the restructuring deal with domestic assets, but Wednesday's proposals did not include such terms.
A dollar bondholder who was not authorised to speak to media likened the debt restructuring plan to lending a bucket of rice to someone and being repaid with two grains a year.
If Evergrande fails to push ahead with restructuring plan, the developer may have to face liquidation proceedings filed by an investor in one of its units in a Hong Kong court.
A representative of Evergrande's winding-up petitioner Top Shine Global Ltd told Reuters on Thursday that the investment firm was still studying the proposal to see if it would support the plan or continue to push ahead with the liquidation request.
Evergrande did not immediately respond to a request for comment.
Its Hong Kong-listed shares remained suspended pending release of financial reports, but peer Country Garden Holdings slipped 0.9% and Sino Ocean Group lost 4.9% on Thursday. - Reuters