China Evergrande's Debt-Restructuring Plan Falls Through

Shares of China Evergrande took a sharp plunge on Monday after the property developer abandoned its $35 billion debt-restructuring plan, which was crucial for its survival, and announced its inability to issue new debt. The stock dropped by 19.1% to 0.45 Hong Kong dollars (US$0.06). The decline in China Evergrande shares also had a ripple effect on other mainland property stocks listed in Hong Kong, with Shimao Group Holdings experiencing a 7.95% fall and Guangzhou R&F Properties dropping 6.6%.

In an exchange filing on Friday, the troubled developer stated that it had to cancel important creditor meetings and scrap its restructuring plan due to disappointing property sales. It also mentioned that it would be exploring alternative paths forward that "mirror the company's current situation and the creditors' demands."

China Evergrande, the world's most indebted developer, had proposed a restructuring plan in March to its creditors, offering different options such as swapping debt for new bonds and equity-linked instruments. By the end of June, the company's total liabilities amounted to a staggering 2.39 trillion yuan (US$327.49 billion).

Without an alternate agreement, bondholders who lent approximately $15 billion to Evergrande could potentially push for the liquidation of the company, which would further burden China's already crippled real-estate market.

In a separate exchange filing on Sunday, China Evergrande disclosed that it was unable to issue new notes due to an ongoing investigation into its onshore subsidiary, Hengda Real Estate Group. Hengda had previously revealed in August that it was being probed by the China Securities Regulatory Commission for potential violations related to information disclosure.