China Evergrande’s Rise, Massive Default and Debt Restructuring

One of China’s largest-ever debt restructurings is in trouble before it even got going. China Evergrande Group was declared to be in default in late 2021, the highest-profile casualty of a broader crisis in the country’s property development industry. The government has stepped in to manage the overhaul, quelling fears of a disorderly collapse that could have jolted the world economy. But new setbacks this year for the company and its billionaire founder have raised the risk of a potential liquidation, and Evergrande bondholders are still wondering how much of their money they’ll see after the dust settles.

Evergrande, started in 1996 by Hui Ka Yan, relied on heavy borrowing to fuel its growth. It became the largest dollar-debt borrower among its peers and for a time the country’s biggest developer by contracted sales. On its website, it says it owns more than 1,300 projects in 280 cities. Over the years the company also branched out into areas ranging from electric vehicles to a local sports team. It had a liquidity scare in 2020, and outlined a plan to roughly halve its $100 billion debt pile by mid-2023. But China’s housing market began to slow as regulators cracked down on excessive borrowing. Further funding problems sent the company’s stock and bonds tumbling and, after late payments on some dollar bonds, it missed a December 2021 deadline to pay two dollar-bond coupons. A “risk management committee” dominated by state officials was quickly set up to stave off a complete collapse and guide the firm’s restructuring.