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China Evergrande Group faces further turmoil as it fails to meet the qualifications for issuing new debt under its debt restructuring plan.
“In view of Hengda Real Estate Group Co Ltd, a principal subsidiary of the company, being investigated, the group is unable to meet the qualifications for the issuance of new notes under the present circumstances,” said Evergrande on September 24. Hengda Real Estate is under scrutiny by the China Securities Regulatory Commission due to a potential violation of disclosure regulations.
Faced with this situation, the company has also advised both current holders of its securities and prospective investors to exercise caution when engaging in transactions involving the company’s securities.
The announcement follows shortly after Evergrande cancelled key creditor meetings that were scheduled to take place between September 25 and 26. These meetings had already experienced a prior postponement last month.
Previously, Evergrande had filed a Chapter 15 bankruptcy petition in the United States on August 17, 2023. Chapter 15 is a legal provision that offers foreign companies, like Evergrande, access to the U.S. bankruptcy system. This provision enables them to navigate financial difficulties while safeguarding their assets within the United States, signifying the severity of Evergrande’s financial challenges.
China Oceanwide Holdings finds itself in troubled waters
Amid a challenging period for key players in China’s real estate sector, including giants like Evergrande and Sunac, China Oceanwide Holdings, a private developer headquartered in Beijing, took a significant step on Monday. The company announced its decision to commence liquidation proceedings following a court order issued by a Bermuda court.
On September 22, 2023, the Bermuda Court formally accepted a winding-up petition filed against China Oceanwide Holdings. This petition, involving $175.36 mn in unpaid loan principal, was initiated by the company’s lenders. It originated in May 2022 and was directly related to a real estate development project located in New York.
Subsequently, the trading of Hong Kong-listed shares in China Oceanwide was suspended due to the court ruling. The suspension is expected to endure until further notice, as indicated in the exchange filing.
Additionally, China Oceanwide Holdings finds itself entangled in a web of legal battles, including a recent winding-up petition brought before a Hong Kong court by a contractor involved in the company’s commercial complex project in downtown Los Angeles. Notably, the company faces $220 mn in lawsuit liabilities linked to the LA project, a partially constructed three-tower hotel and residential complex that has remained in a state of uncertainty for several years, as documented in a September 2022 filing.
In terms of financial performance, Oceanwide’s earnings report for the first six months of 2023 painted a stark picture, with zero revenue recorded during this period, in sharp contrast to the HKD 28.02 mn ($3.58 mn) generated in the same timeframe the previous year. Additionally, the company reported a substantial net loss of HKD 709.10 mn ($90.74 mn) for the first half of 2023, closely mirroring the HKD 728.83 mn ($93.26 mn) loss reported in the corresponding period a year earlier.
“The Group’s liquidity issues have caused the Group to encounter immense and unprecedented difficulties…Amidst the unclear prospect of China’s economic recovery, the Group’s liquidity issues are unlikely to be resolved in the second half of 2023,” said the company.
