China Evergrande Group is checking to see if offshore creditors will back its plan to fight a lawsuit in Hong Kong aimed at liquidating the group, a source has revealed.
Evergrande, which has been working on a debt restructuring plan, wants creditors, who are owed nearly $23 billion in offshore debt, to help it fight a petition to wind up the company when the lawsuit goes to court on August 31, the person said.
Last week, Top Shine Global Ltd, an investor in Evergrande unit Fangchebao, said it had filed a winding-up petition against the developer as it had not honoured a pact to repurchase shares from Top Shine in Fangchebao.
A successful outcome of the petition could impact the developer’s debt restructuring plan by diminishing the value of the overseas assets that are central to the interests of offshore creditors.
The developer was not considering an out-of-court settlement with Top Shine at the moment, the source said.
Evergrande declined to comment. Top Shine could not be immediately reached for comment. And the source declined to be named as the deliberations on the firm’s restructuring process are confidential.
The petition marks the first lawsuit of its kind against Evergrande, which has over $300 billion in liabilities.
Evergrande, formerly China’s top-selling developer, said last week that Top Shine filed the liquidation petition over a financial obligation of $110 million, adding it would “vigorously” oppose the petition.
It also said the lawsuit will not impact its offshore debt restructuring plan, expected to be unveiled by the end of this month.
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Restructuring Plan
Evergrande’s restructuring proposal is taking shape and the company aims to reach consensus with offshore creditors on specific restructuring terms by the end of this year, the person said.
While a liquidation or fire sale of Evergrande assets would result in very little recovery for creditors, the developer is pushing ahead with its asset disposal plan with an aim to set aside such proceeds for restructuring purposes, the person said.
The sale of Evergrande’s Hong Kong headquarters building might conclude in the coming months, the person said, after a potential $1.7 billion deal for the same collapsed late last year.
The sale of a plot of undeveloped land in Hong Kong’s suburbs is also still underway, the person added.
US asset manager Oaktree Capital Management, a lender to Evergrande to develop that land plot, has sought to seize control of the asset by appointing a receiver in February.
- Reuters with additional editing by Jim Pollard
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