Sidley Austin, Kirkland & Ellis, Maples Group and Harneys advised parties on preliminary proposals for the restructuring of USD19.15 billion in offshore debt of China Evergrande Group, the world’s most indebted real estate developer.
Sidley Austin’s Hong Kong-based partners Gordon Davidson and Carrie Li were along with Maples Group’s lawyers in Hong Kong, the Cayman Islands, and BVI to represent Evergrande in the matter.
Kirkland & Ellis and Harneys acted as the legal counsel to the ad hoc group of bondholders.
Kirkland & Ellis team was led by restructuring partners Neil McDonald and Jacqueline Tang in Hong Kong.
The core of the restructuring proposal is the issuance of new bonds, replacing the original bonds, to buy up breathing room in three specific groups of arrangements.
The first arrangement is for the 22 offshore notes related to the Evergrande Group:
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- Creditors can replace the old bonds with three new bonds issued by Evergrande on a 1:1 basis. The new bonds have a maturity of 10 to 12 years and a coupon rate ranging from 2% to 4%;
- Or the bondholders may convert the bonds into shares on a 1:1 basis, i.e. by replacing them with mandatory exchangeable bonds and notes linked to Evergrande Property, Evergrande New Energy Auto or China Evergrande shares;
- Or a combination of new bonds and debt-to-equity, under which the new bonds have a maturity of five to nine years and a coupon rate ranging from 5% to 7.5%.
The second and third groups of arrangements are for other offshore financing by Evergrande subsidiaries Scenery Journey and Tianji Holding. Both will issue five and four new bonds respectively with maturities ranging from four to eight years and coupon rates ranging from 5.5% to 8.5%, involving a total principal amount of USD6.5 billion and USD800 million, respectively.
If all goes well, the restructuring plan is expected to take effect as early as 1 October 2023 and no later than 15 December 2023.
China Evergrande’s executive director, Xiao En, said the preliminary estimate of the company’s offshore direct debt was equivalent to approximately USD22.7 billion.
Members of the ad-hoc group of bondholders collectively hold about 84% of Evergrande’s overall offshore debt.
Another Chinese property giant, Sunac China, which was also advised by Sidley Austin, also announced a key agreement with a group of creditors holding USD9 billion of its offshore debt just days after Evergrande announced its proposal.
Amid China’s real estate crisis, Sidley Austin has represented many leading Chinese real estate developers, such as China Fortune Land Development, Modern Land and Guangzhou R&F Properties, in their debt restructuring proposals.
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