What’s Next for China Evergrande, Crushed by Debt?

One of China’s largest-ever debt restructurings is starting to take shape, with the Communist Party now in the driver’s seat, after China Evergrande Group was formally declared to be in default. The world’s most indebted developer, at the center of a broader debt crisis in the country’s property industry, has unveiled preliminary principles for the restructuring of its offshore debt. While the state’s intervention has quelled fears of a disorderly collapse that would jolt the world economy, bondholders are wondering how much of their money they’ll see after the dust settles. Meanwhile, Evergrande is under pressure to deliver thousands of pre-sold housing projects -- and pay its workers -- to avoid sparking social unrest.

Evergrande, founded in 1996, grew through massive borrowing. Back in 2010, it sold what was at the time the biggest high-yield dollar bond among Chinese builders at $750 million. The firm subsequently embarked on even more of a debt binge to fuel growth, becoming the largest dollar-debt borrower among peers and for a time the country’s biggest developer by contracted sales. It owns more than 1,300 projects in 280 cities, according to the company’s website. Following a liquidity scare in 2020, Evergrande outlined a plan to roughly halve its $100 billion debt pile by mid-2023. But China’s housing market started slowing down amid regulatory curbs. Another liquidity scare sent the company’s stock and bonds tumbling, and after having made late payments on some dollar bonds it missed a deadline in December to pay two dollar-bond coupons before grace periods ended.