Debt-laden China Evergrande ends Shenzhen listing plan, some investors to stay on

In this photo illustration taken on 24 Sept. 2020, the Evergrande Group logo is seen displayed on a smartphone. The Evergrande Group or the Evergrande Real Estate Group (previously Hengda Group) is China’s second-largest property developer by sales.

Sheldon Cooper | SOPA Images | LightRocket via Getty Images

Debt-laden China Evergrande Group said it has decided to terminate a reorganization plan with Shenzhen Special Economic Zone Real Estate & Properties Group, ending a long-awaited backdoor listing plan in Shenzhen.

Market concern has mounted in recent weeks that Evergrande whose borrowings totaled 835.5 billion yuan ($123.93 billion) at end-June – was headed for a cash crunch if it could not get Chinese approval for the listing plan that has languished for four years.

But some investors in the listing plan have agreed not to demand repayment, the company said in a filing to the Hong Kong bourse on Sunday.

Evergrande has been scrambling to raise cash as China’s government tackles what it considers excessive borrowing in the real estate development sector with new debt-ratio caps. It recently raised $555 million in a secondary share sale.

In September Reuters reported that Evergrande had sent a letter to the Guangdong provincial government asking for accelerated approval to float subsidiary Hengda Real Estate via the reverse merger in Shenzhen.

It warned of risk to China’s financial stability if Evergrande failed to meet a January listing deadline, which would have triggered some 144 billion yuan ($21.79 billion) in payments to backers.

But the company said in the filing that some creditors had agreed not to press for repayment.

Of the 130 billion yuan of equity interests held by strategic investors, investors holding 86.3 billion yuan equity interests have agreed not to require the company to repurchase their equity interests and will continue to hold their interests in Hengda Real Estate.

Investors holding 35.7 billion yuan of equity interests will enter into agreements soon, and Evergrande is still in talks with investors holding 5 billion yuan, the Hong Kong-listed firm said in the stock exchange filing.

Evergrande said it has paid the principal of strategic investors holding 3 billion yuan equity interests in Hengda Real Estate, and will repurchase their equity interests.

The company said it will make a further statement on details of the agreements.

Trading in shares of Shenzhen Special Economic Zone Real Estate & Properties Group, which have been suspended since September 2016, resumes on Monday.