- After 2 FDA rejections and restructuring drive, Intercept sells itself to Italy’s Alfasigma FiercePharma
- Intercept, once a biotech trailblazer, sells itself for less than $1 billion STAT
- Alfasigma to Acquire Intercept Pharmaceuticals for $19.00 per Share in Cash, Expanding the Global Footprint of Alfasigma Via a Leader in Rare and Serious Liver Diseases Yahoo Finance
- Why Intercept Pharmaceuticals Stock Is Skyrocketing Today The Motley Fool
- Why Is Intercept Pharmaceuticals (ICPT) Stock Up 75% Today? InvestorPlace
- View Full Coverage on Google News
Tag Archives: restructuring
Warner Bros. Discovery to Take $2B-Plus Writedown on Content and Development Amid Restructuring – The Hollywood Reporter
Warner Bros. Discovery’s restructuring costs are beginning to take shape.
On Monday the company said in a securities filing that it expects to take $3.2 billion to $4.3 billion in pre-tax restructuring charges tied to its WarnerMedia acquisition, including writedowns related to content of between $2 billion to $2.5 billion.
WBD has been engaged in what it has called a “global strategic review of content” since the WarnerMedia deal closed, canceling projects, nixing development and shelving unproductive library content. In its first quarter after the deal closed, it disclosed an $825 million writedown on content, and a substantially similar number is expected in in its Q3 report.
Among the projects scrapped were the nearly-completed Batgirl movie (which was developed for HBO Max), a Wonder Twins movie, and TV shows like Full Frontal with Samantha Bee.
In addition to the high-profile content cancelations and abandoned development, the company has also been laying off employees on a rolling basis, with different departments seeing cuts in recent months. The Warner Bros. TV Group was impacted earlier this month.
To that end, WBD says it expects organizational restructuring costs of between $800 million-$1.1 billion and facility consolidation and other contractual savings of between $400 million-$700 million.
Critically, the WBD filing suggests that around 70 percent of that $3.2 billion-$4.3 billion figure has been taken since the acquisition, meaning that it is mostly done with its strategic review of the company’s business, though it adds that its write-down and restructuring efforts are “expected to be substantially completed by the end of 2024.”
And the company also plans to save costs by merging its streaming services Discovery+ and HBO Max next year, which will enable the company to reduct the number of service providers it uses, and consolidate some technical costs. It will also consolidate office space, though specifics of its future footprint in New York (where it has offices in both Hudson Yards and Park Avenue South) remain to be seen.
Monday’s filing is the clearest picture yet of the restructuring efforts being undertaken by the company, which originally promised $3 billion in cost savings from the merger.
The $2 billion-plus content writedown is particularly eye-opening, and likely includes writedowns not just to the canceled and abandoned film and TV projects, but also WBD’s decision to remove some library programming from HBO Max.
Of course, the company will also continue to spend $20 billion or so on content each year, though executives have told analysts that they expect to spend that money “smartly,” and to “drive for the highest level of financial discipline here to make sure that every dollar spent is purposeful and measured,” per CFO Gunnar Weidenfels.
At a town hall last month, WBD CEO David Zaslav and other top executives acknowledged the “disruption” and “difficulty all media companies are facing” in the current environment, and also the “challenges” in integrating WarnerMedia and Discovery.
However, he reiterated that the company is “absolutely not for sale,” and that it expects to be competitive as a pure-play content company with its current assets.
Travis Kelce on restructuring freeing cap space: I think something’s in the air
The Chiefs restructured tight end Travis Kelce‘s contract this week in a move that created $3.455 million in cap space by converting some of his salary into a signing bonus.
On the New Heights podcast that Kelce hosts with his brother Jason, the tight end discussed the restructure. Kelce said he didn’t hesitate to say yes when his agent called him about the Chiefs’ plan because it allowed him to get money right away and gave the team cap space to use on getting better this season.
Kelce said he believes the restructuring is “a start to a move” because the team wouldn’t just give him money upfront out of kindness. He said he’s heard the chatter about interest in wide receiver Odell Beckham Jr. and would welcome him as a teammate, before adding that he’s not sure what the team may be planning.
“I want them to come true,” Kelce said, via the Kansas City Star. “I haven’t heard anything. I have not heard anything in the locker room or anything around the facility. “But I think that something’s in the air for sure. And if it means OBJ . . . alright now.”
There’s no deadline to sign free agents, but the NFL’s trade deadline is November 1 and that should spur action for the Chiefs and other teams looking to bolster their rosters ahead of the playoff push.
7-Eleven cuts 880 jobs as part of restructuring
Peter Parks | AFP | Getty Images
Convenience store chain 7-Eleven has cut roughly 880 corporate jobs in the United States, CNBC has learned, roughly a year after it completed its $21 billion acquisition of rival C-store and gas station business Speedway.
7-Eleven is owned by the Japanese retail conglomerate Seven & i Holdings, which came under pressure earlier this year from the San Francisco-based investment company ValueAct Capital to consider strategic alternatives. ValueAct had been urging Seven & i to narrow its focus to 7-Eleven, and it backed a new slate of directors on the Japanese company’s board.
More recently, businesses in the U.S. have been grappling with inflation on everything from fuel to labor to rent, which are weighing on profits. Many companies are now either hitting the breaks on hiring or beginning to lay people off, as they look for opportunities to slash expenses.
7-Eleven has also been contending with higher prices at gas pumps, which have led some consumers to hold off on filling up the tank, or buying extra goods inside of its retail shops.
7-Eleven operates more than 13,000 locations across North America, according to its parent company’s most recent annual filing, roughly 9,500 of which are under its namesake banner.
The company didn’t immediately confirm how many employees it has in the U.S.
“As with any merger, our integration approach includes assessing our combined organization structure,” a 7-Eleven spokesperson told CNBC in an emailed statement. “The review was slowed by Covid-19 but is now complete, and we are finalizing the go-forward organization structure.”
The person said the cuts were of certain jobs in the company’s Irving, Texas, and Enon, Ohio, support centers, as well as field support roles. 7-Eleven is headquartered in Irving, and Speedway is based in Enon.
“These decisions have not been made lightly, and we are working to support impacted employees, including providing career transition services,” the company spokesperson added.
7-Eleven bought Speedway in order to beef up its presence in the U.S., particularly in the Midwest and along the the East Coast. The Federal Trade Commission, however, charged that the takeover of Marathon’s Speedway subsidiary violated federal antitrust laws. 7-Eleven was later ordered to sell over 200 retail outlets to settle the matter.
7-Eleven has meantime been testing so-called “Evolution” stores that offer customers special coffee drinks, local grub and features like mobile checkout. It opened its ninth in the country, in Dallas, in June.
Voyager Digital Commences Financial Restructuring Process to Maximize Value for All Stakeholders
Files Voluntary Petitions for Chapter 11 Protection to Implement Restructuring; Proposed Plan of Reorganization Creates Efficient Path to Resume Account Access and Return Value to Customers
Voyager Has Approximately $1.3 Billion of Crypto Assets on the Platform, More Than $350 Million of Cash Held in the FBO Account for Customers at Metropolitan Commercial Bank, and Claims Against Three Arrows Capital of More Than $650 Million1
NEW YORK, July 5, 2022 /PRNewswire/ – Voyager Digital Ltd. (“Voyager” or the “Company”) (TSX: VOYG) (OTCQX: VYGVF) (FRA: UCD2), today announced that it has commenced a voluntary Chapter 11 process to maximize value for all stakeholders. As part of this process, the Company and its main operating subsidiaries filed voluntary petitions for reorganization under Chapter 11 in the U.S. Bankruptcy Court of the Southern District of New York (the “Court”). The Company intends to seek recognition of the Chapter 11 case of Voyager in the Ontario Superior Court of Justice (Commercial List) pursuant to the Companies’ Creditors Arrangement Act.
“This comprehensive reorganization is the best way to protect assets on the platform and maximize value for all stakeholders, including customers,” said Stephen Ehrlich, Chief Executive Officer of Voyager. “Voyager’s platform was built to empower investors by providing access to crypto asset trading with simplicity, speed, liquidity, and transparency. While I strongly believe in this future, the prolonged volatility and contagion in the crypto markets over the past few months, and the default of Three Arrows Capital (“3AC”) on a loan from the Company’s subsidiary, Voyager Digital, LLC, require us to take deliberate and decisive action now. The chapter 11 process provides an efficient and equitable mechanism to maximize recovery.”
The proposed Plan of Reorganization (“Plan”) would, upon implementation, resume account access and return value to customers. Under this Plan, which is subject to change given ongoing discussions with other parties, and requires Court approval, customers with crypto in their account(s) will receive in exchange a combination of the crypto in their account(s), proceeds from the 3AC recovery, common shares in the newly reorganized Company, and Voyager tokens. The plan contemplates an opportunity for customers to elect the proportion of common equity and crypto they will receive, subject to certain maximum thresholds.
Customers with USD deposits in their account(s) will receive access to those funds after a reconciliation and fraud prevention process is completed with Metropolitan Commercial Bank.
The Company continues to evaluate all strategic alternatives to maximize value for stakeholders.
The Company has over $110 million of cash and owned crypto assets on hand, which will provide liquidity to support day-to-day operations during the Chapter 11 process, in addition to more than $350 million of cash held in the For Benefit of Customers (FBO) account at Metropolitan Commercial Bank. Voyager also has approximately $1.3 billion of crypto assets on its platform, plus claims against Three Arrows Capital (“3AC”) of more than $650 million.
Voyager previously announced that its subsidiary, Voyager Digital LLC, issued a notice of default to 3AC for failure to make the required payments on its previously disclosed loan of 15,250 BTC and $350 million USDC. Voyager is actively pursuing all available remedies for recovery from 3AC, including through the court-supervised processes in the British Virgin Islands and New York.
The Company also announced the appointment of a four new independent directors: Matthew Ray at Voyager Digital Ltd.; Scott Vogel at Voyager Digital Holdings, Inc.; and Jill Frizzley and Timothy Pohl at Voyager Digital LLC. Information regarding their backgrounds and relevant experience is included at the end of this release.
As part of the reorganization process, the Company will file customary “First Day” motions to allow it to maintain operations in the ordinary course. Voyager intends to pay its employees in the usual manner and continue their primary benefits and certain customer programs without disruption. The Company expects to receive court approval for all these routine requests. Trading, deposits, withdrawals and loyalty rewards on the Voyager platform remain temporarily suspended.
Parties with questions about the chapter 11 process may contact the Company’s Claims Agent, Stretto, at +1 (855) 473-8665 (toll-free in the U.S.) or +1 (949) 271-6507 (for parties outside the U.S.). They have also set up a website at http://cases.stretto.com/Voyager, which includes court documents and other information.
To effectuate the restructuring process, the Company has engaged Moelis & Company and The Consello Group as financial advisors, Kirkland & Ellis LLP as legal advisors, and Berkeley Research Group, LLC, as restructuring advisor.
New Independent Directors to Provide Additional Leadership and Expertise
Matthew Ray joins as an independent director of Voyager Digital Ltd. Mr. Ray is the Founder and Managing Partner of Portage Point Partners where he has served as Chief Restructuring Officer (CRO), Chief Executive Officer (CEO), Chairman, Lead Independent Director, Special Restructuring Committee Chairperson and Strategic Advisor leading wide-ranging transformations and restructurings for both private and public companies.
Scott Vogel joins as an independent director of Voyager Digital Holdings, Inc. Mr. Vogel has broad experience sitting on numerous boards of directors for financially distressed companies in a diverse set of industries. Mr. Vogel carefully and skillfully manages complex situations, develops restructuring plans and post-restructuring organizational priorities, builds consensus amongst and between stakeholders and management, executes complex capital market and corporate transactions, facilitates clear lines of communication, and aligns management incentives to ensure accountability.
Jill Frizzley joins as an independent director of Voyager Digital LLC. Ms. Frizzley is a corporate governance expert with significant experience serving on boards of directors and advising on corporate governance, restructuring, bankruptcies, and mergers and acquisitions. Leveraging over two decades of legal practice in financial restructuring and insolvency, Ms. Frizzley has a deep wealth of knowledge encompassing corporate, financial, and governance matters across a wide range of industries.
Timothy Pohl joins as an independent director of Voyager Digital LLC. Mr. Pohl has extensive experience and expertise in all aspects of corporate restructurings and financing, mergers and acquisitions, valuation, liquidity and balance sheet assessment and analysis, capital markets, corporate law, restructuring law, and litigation. Mr. Pohl currently serves as a Senior Advisor in a number of situations, as well as an Independent Director for a number of corporations. Mr. Pohl has also advised across a wide range of industries and has provided expert testimony on valuation and corporate and restructuring matters.
About Voyager Digital Ltd.
Voyager Digital Ltd.’s (TSX: VOYG) (OTCQX: VYGVF) (FRA: UCD2) US subsidiary, Voyager Digital, LLC, is a cryptocurrency platform in the United States founded in 2018 to bring choice, transparency, and cost-efficiency to the marketplace. Voyager offers a secure way to trade over 100 different crypto assets using its easy-to-use mobile application. Through its subsidiary Coinify ApS, Voyager provides crypto payment solutions for both consumers and merchants around the globe. To learn more about the company, please visit https://www.investvoyager.com.
Forward Looking Statements
Certain information in this press release, including, but not limited to, statements regarding the restructuring process, the restructuring Plan, available remedies for recovery from 3AC, intended filings as part of the restructuring process, resumption of account access, return of value to customers, the ability of Voyager to continue as a going concern, exploration of strategic alternatives, discussions with third parties in respect of strategic alternatives and the results of those discussions, the temporary nature of the suspension of the platform, future growth and performance of the business, the exploration of strategic alternatives, future adoption of digital assets, anticipated trends and challenges in our business and industry, the regulation of digital assets offerings, the impact of the 3AC default on the Company, the Company’s liquidity and ability to satisfy customer orders and withdrawals and the Company’s anticipated results may constitute forward looking information (collectively, forward-looking statements), which can be identified by the use of terms such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” (or the negatives) or other similar variations. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Voyager’s actual results, performance or achievements to be materially different from any of its future results, performance or achievements expressed or implied by forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this press release may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. It is uncertain as to the timing or results of the restructuring process or the terms of the final restructuring plan, when account access will resume, the value to be returned to customers, what amount Voyager will be able to recover from 3AC for non-payment or the legal remedies available to Voyager in connection with such non-payment or the impact on the future business, cash flows, liquidity and prospects of Voyager as a result of 3AC’s non-payment. Forward looking statements are subject to the risk that the global economy, industry, or the Company’s businesses and investments do not perform as anticipated, that revenue or expenses estimates may not be met or may be materially less or more than those anticipated, that parties to whom the Company lends assets are able to repay such loans in full and in a timely manner, that trading momentum does not continue or the demand for trading solutions declines, customer acquisition does not increase as planned, product and international expansion do not occur as planned, risks of compliance with laws and regulations that currently apply or become applicable to the business and those other risks contained in the Company’s public filings, including in its Management Discussion and Analysis and its Annual Information Form (AIF). Factors that could cause actual results of the Company and its businesses to differ materially from those described in such forward-looking statements include, but are not limited to, the results of the restructuring process and the terms of the restructuring plan, if such a plan is ultimately agreed to, the results from the exploration of strategic alternatives, the inability to resume trading, deposits, withdrawals and rewards on the platform in a timely manner, an inability to drawdown under the credit facility or access other sources of financing, an increase in customer demands for withdrawals from the platform, any insolvency or similar proceedings with respect to 3AC, our ability to find a strategic alternative, a decline in the digital asset market or general economic conditions; changes in laws or approaches to regulation, the failure or delay in the adoption of digital assets and the blockchain ecosystem by institutions; changes in the volatility of crypto currency, changes in demand for Bitcoin and Ethereum, changes in the status or classification of cryptocurrency assets, cybersecurity breaches, a delay or failure in developing infrastructure for the trading businesses or achieving mandates and gaining traction; failure to grow assets under management, an adverse development with respect to an issuer or party to the transaction or failure to obtain a required regulatory approval. Readers are cautioned that Assets on Platform and trading volumes fluctuate and may increase and decrease from time to time and that such fluctuations are beyond the Company’s control. Forward-looking statements, past and present performance and trends are not guarantees of future performance, accordingly, you should not put undue reliance on forward-looking statements, current or past performance, or current or past trends. Information identifying assumptions, risks, and uncertainties relating to the Company are contained in its filings with the Canadian securities regulators available at www.sedar.com. The forward-looking statements in this press release are applicable only as of the date of this release or as of the date specified in the relevant forward-looking statement and the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events, except as required by law. The Company assumes no obligation to provide operational updates, except as required by law. If the Company does update one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those or other forward-looking statements, unless required by law. Readers are cautioned that past performance is not indicative of future performance. There is no assurance that the funds available under the loan agreement will be available or, even if available will, together with any other assets of Voyager be sufficient to safeguard assets.
The TSX has not approved or disapproved of the information contained herein.
|
__________________ |
|
1 The amounts are as of June 30, 2022, and are preliminary, non-reviewed and unaudited, and subject to final adjustments following completion of quarterly and year-end close procedures. |
SOURCE Voyager Digital Ltd.
UiPath to cut 5% of its workforce as part of restructuring plan
UiPath IPO at the New York Stock Exchange.
Source: NYSE
UiPath will reduce roughly 5% of its total workforce as part of a restructuring plan, according to a new SEC filing.
The company, a provider of software for automating office tasks, said that it had 4,200 employees as of April 30, 2022. Most of the layoffs are expected to occur by the end of July.
UiPath’s board approved the decision to reduce headcount, citing the need to increase profits, the filing said.
The company estimates that it will spend $15 million as part of the plan, mainly to pay for employee severance and compensation benefits.
A spokesperson told CNBC that UiPath’s layoffs are not related to market conditions.
“In the context of ongoing business prioritization, UiPath is undertaking a restructuring action that will primarily focus on the effectiveness of our go-to-market organization,” the spokesperson said, noting that the company believes the cuts will help it simplify its go-to-market approach and lead to higher sales productivity and better market segmentation.
Shares of UiPath were flat at about 11 a.m. ET Monday and are down 49% year-to-date. But, shares are up about 23% for the month after the company reported fiscal Q1 earnings on June 1 that exceeded prior guidance and raised the outlook for Q2.
“This is about continuing to drive sustained, profitable growth. We want to thank our departing team members—we appreciate their incredible talent and contributions in support of UiPath and our mission,” the spokesperson added.
The software provider has more than 45 offices across the U.S., Europe, and Asia.
“The announcement signals PATH’s increasing focus on profitability amid growing investor scrutiny on tech stocks with limited profitability & FCF.” Cowen analysts said in a note to investors on Monday. “It had signaled its commitment to its longer-term 20% adj EBIT target and this news reflects the first major changes put into place post its recent senior management appointments (new Co-CEO and Chief Business Officer).”
Toshiba CEO suddenly resigns amid opposition to restructuring plans
TOKYO, March 1 (Reuters) – Toshiba Corp (6502.T) said on Tuesday CEO Satoshi Tsunakawa has resigned – a sudden departure that comes after sources said revised restructuring plans sparked opposition within the company in addition to long-standing anger from shareholders.
New interim CEO Taro Shimada said, however, that the company would continue to pursue its current break-up plan as it had been approved by the board.
Initial plans announced last year by the scandal-ridden conglomerate to split into three had been much criticised by foreign hedge fund shareholders – many of which favour a sale to a private equity firm. But a revised plan last month that called for a breakup into two companies and the sale of other businesses also met with internal dissent, according to two sources familiar with the matter.
Register now for FREE unlimited access to Reuters.com
Register
There were fears within Toshiba that its planned sale of units such as its elevator business would leave the company only with low-margin businesses, said the sources who were not authorised to speak to media and declined to be identified.
Asked about internal opposition, Toshiba said it firmly believes its announced reorganization plan is the best option for the company but declined to comment further.
For some observers, the departure of Tsunakawa as well as that of Mamoru Hatazawa, a board member who had pushed to split up the company, add to doubts about whether Toshiba will be able to press ahead with the plans to break up.
“The split plan will be reviewed – we think there is a chance it is scrapped,” said Justin Tang, head of Asian research at investment advisor United First Partners in Singapore.
NEW GUARD
The appointment of Shimada, a former Siemens AG (SIEGn.DE) executive who only joined in 2018, represents a significant changing of the guard at Toshiba, helping the company’s shares end 2% higher.
Toshiba also said Goro Yanase, the head of Toshiba’s elevator business, will be appointed interim chief operating officer.
The board will monitor the performance of the new appointees and the status of business execution and “where appropriate, the board will continue its deliberations, toward appointing external candidates,” it said in a statement.
While Tsunakawa had stepped back into the CEO role on an interim basis and had said he did not expect to be in the position long-term, the timing of the announcement was a surprise.
Raymond Zage, head of Toshiba’s nomination committee, said the new appointments had been made at this time after some shareholders had voiced concerns that management had not appeared able to proceed with the firm’s restructuring plans in a timely manner.
An extraordinary general meeting that will seek initial shareholder approval for the revised breakup plan has been set for March 24. Shareholders will also vote on a major shareholder’s proposal that Toshiba explore other options and solicit buyout offers from private equity firms. read more
The original break-up plan was announced last November after a five-month strategic review following years of accounting scandals and governance issues that undermined investor confidence and saw Toshiba’s market value more than halve, to around $18 billion, from an early 2000s peak.
Register now for FREE unlimited access to Reuters.com
Register
Reporting by Makiko Yamazaki and Junko Fujita; Additional reporting by Anshuman Daga in Singapore; Editing by Edwina Gibbs
Our Standards: The Thomson Reuters Trust Principles.
Evergrande set for restructuring, with no word on first formal default
A housing complex by Chinese property developer Evergrande in Beijing.
Noel Celis | AFP | Getty Images
Evergrande is set to forge ahead into a debt restructuring that would include all of its offshore public bonds and private debt, according to analysts.
The troubled real estate developer, swamped by $300 billion of liabilities, also said Tuesday that it’s setting up a risk management committee, which will play a role in mitigating and eliminating future risks for the firm. The world’s most indebted property developer has been struggling to raise funds to pay suppliers and investors.
Those developments lifted its shares from a record low, as it bounced back over on Tuesday although they later lost steam. Stocks of other Hong Kong-listed property firms also jumped.
Sentiment has also been buoyed by China’s move toward an emphasis on easing. On Monday, the country’s central bank said it would cut the reserve requirement ratio, or the amount of cash that banks must hold as reserves, for the second time this year. That frees up 1.2 trillion yuan ($282 billion) to boost slowing growth amid the pandemic.
“It seems quite likely now that a restructuring of Evergrande’s offshore public bonds and private debt obligations will be taking place soon,” Martin Hennecke, head of Asia investment advisory and communications at St. James’s Place, told CNBC on Tuesday.
Those private debt obligations would likely include bonds of joint venture Jumbo Fortune and unit Scenery Journey, according to Luther Chai of CreditSights, a subsidiary of Fitch Ratings.
There was still no word from the developer on whether it has paid $82.5 million worth of interest — the 30-day grace period ended Monday. Analysts said, however, it was unlikely the interest was paid, given the firm’s restructuring plans. Evergrande said Friday it “plans to actively engage with offshore creditors to formulate a viable restructuring plan.”
It would be the first time that the firm formally defaults if so, as it has managed to make the last few interest payments at the eleventh hour – within the grace period deadline.
China shifting to policy easing
Analysts said China’s shift toward monetary policy easing would be noteworthy in turning things around for the troubled real estate market.
“What is very noteworthy … in my view, is that Chinese policymakers’ rhetoric has shifted significantly most recently, with an emphasis on easing, which includes the reserve requirement ratio cut, a wider easing of curbs on the real estate sector, a pledge for stabilization in 2022 and focus on economic support through various monetary policy tools,” said Hennecke.
China’s easing is especially significant given it was the government’s tough stance on reducing debt and other tightening in the real estate sector that triggered the current crisis in the first place, said Hennecke.
“Perhaps more important than the RRR announcement, the PBOC decision was closely followed by a statement from the communist party central committee vowing to stabilize the economy in 2022, signalling an easing of some property curbs,” added Rodrigo Catril, senior FX strategist at National Australia Bank.
China’s real estate sector has been hit by the government’s moves to tame debt. Evergrande’s problems came to a head after the authorities rolled out the “three red lines” policy last year. That policy places a limit on debt in relation to a firm’s cash flows, assets and capital levels. That started to rein in developers after years of growth fueled by excessive debt.
Worries over Evergrande’s huge debt have roiled global markets amid concerns about a potential spillover into the rest of China’s real estate industry or even the broader economy. As its debt crisis unraveled, other Chinese real estate developers also started showing signs of strain – some missed interest payments, while others defaulted on their debt altogether.
Evergrande Debt Restructuring Looms After Months of Turmoil
(Bloomberg) — China Evergrande Group’s long-awaited debt restructuring may finally be at hand, posing a fresh test for Xi Jinping’s government as it tries to rein in the country’s financial excesses without derailing economic growth.
Most Read from Bloomberg
The embattled developer said in an exchange filing late Friday that it plans to “actively engage” with offshore creditors on a restructuring plan, offering its most explicit acknowledgment yet that its $300 billion of overseas and local liabilities have become unsustainable.
A barrage of statements from Chinese regulators — several of which landed just minutes after Evergrande’s announcement — suggested authorities are striving to contain the fallout on homeowners, the financial system and the broader economy rather than orchestrate a bailout.
The government of Guangdong, the southern province where Evergrande is based, summoned founder Hui Ka Yan to express concern over the company’s announcement and said it would dispatch a team to the developer to ensure “normal” operations. The People’s Bank of China blamed Evergrande’s problems on the company’s “own poor management” and “reckless expansion.”
The flurry of activity follows several weeks of relative calm for Evergrande, which has been making last-minute payments on its dollar notes since late October at the urging of Beijing. Friday’s statements signal the world’s most indebted developer may struggle to make further payments within their grace periods, even after a spate of personal asset sales by Hui that appeared designed to help Evergrande meet its near-term debt obligations.
The company’s next test comes Monday. That’s when a 30-day grace period ends on two dollar bond interest payments that were initially due Nov. 6: a $41.9 million coupon for a note maturing in 2022 and $40.6 million of interest on a security due the following year. Both bonds were issued by unit Scenery Journey Ltd.
The question for global markets is whether Beijing can coordinate a restructuring without upending the broader real estate sector, which accounts for nearly a quarter of economic output. Policy makers have a history of abandoning efforts to rein in developers when the risks to growth mount, though Xi appears more determined than his predecessors to stamp out the moral hazard that allowed companies like Evergrande to expand so rapidly.
One risk is that Beijing may not have a full picture of how indebted Evergrande and its peers have become. The Shenzhen-based developer indicated in its exchange filing on Friday that it may not be able to fulfill its pledge to guarantee payment on a $260 million note issued by joint venture Jumbo Fortune Enterprises, an obligation that many Evergrande investors didn’t even know existed until a few months ago.
While it will be important to monitor how Evergrande’s restructuring progresses, the odds of renewed panic in Chinese credit markets are low, according to analysts at China International Capital Corp., one of the nation’s largest investment banks. Real estate companies with poor management and high financial risks will be “phased out,” but authorities are likely to ensure that higher-quality developers retain access to funding, CICC analysts Yan Xu and Eric Yu Zhang wrote in a report.
China is likely to ease restrictions on the real estate sector this month and into the first quarter of 2022, according to analysts at Jefferies Financial Group Inc. Regulators on Friday signaled that they would expand mortgage support beyond first-time homebuyers, guide banks to provide loans to developers for acquisitions and further open funding channels including the asset-backed securities market, the analysts wrote. A reduction in banks’ reserve requirements is likely in the next few weeks after Premier Li Keqiang said on Friday a cut would come at the “proper time,” the analysts wrote.
Bond investors have been anticipating an Evergrande restructuring for months, with the company’s 2025 dollar notes trading below 30 cents since the end of September. An index of Chinese junk bonds slid for a third day on Friday, lifting the yields to 22%, though gains in investment-grade notes suggested bondholders have become more relaxed about the prospect of contagion than they were earlier this year.
Investors are increasingly differentiating between the weakest and strongest borrowers after China’s government took steps to mitigate the cash crunch for higher-rated developers in recent weeks. Apart from Evergrande, money managers are bracing for a potential default by Kaisa Group Holdings Ltd., which faces a $400 million bond maturity on Tuesday after failing to swap the notes for new ones due 18 months later. Smaller Chinese developer Sunshine 100 China Holdings Ltd. defaulted on $179 million of debt and interest payments due Sunday.
For Evergrande, the next step may be to enter into an informal debt standstill as it continues to try to negotiate with creditors, according to Bloomberg Intelligence analyst Daniel Fan.
“Extension of maturities, based on sustainability of debt, would be likely,” he said. “One option to sweeten the process is to link some of the repayment to its offshore assets,” such as its Hong Kong-listed electric vehicle unit, Fan added.
Evergrande’s offshore creditors are widely expected to fall near the bottom of the priority list in a restructuring, behind nearly 1.6 million homeowners who gave the developer down payments on properties, local suppliers, Evergrande employees, and individual investors who bought wealth management and trust products tied to the company. Several Evergrande-linked WMPs and trusts have already defaulted, restructured or fallen behind on payments.
(Updates with analyst comments and Sunshine 100 default from 10th paragraph.)
Most Read from Bloomberg Businessweek
©2021 Bloomberg L.P.
Evergrande CEO in Hong Kong for restructuring, asset sale talks, sources say
Check out what’s clicking on FoxBusiness.com.
HONG KONG – Evergrande Group’s chief executive is holding talks in Hong Kong with investment banks and creditors over a possible restructuring and asset sales, two people said, as the Chinese developer battles against default on more than $300 billion in debts.
CEO Xia Haijun, a confidant of chairman Hui Ka Yan and who runs Evergrande’s day-to-day operations including financing, has been in Hong Kong, where the property firm has a major presence, for more than two months, the two sources told Reuters.
A third source said Xia was talking to banks and creditors in Hong Kong, but did not say what was being discussed.
EVERGRANDE CREDITORS FEAR IMMINENT DEFAULT AS CONCERNS SHAKE SECTOR
Shenzhen-headquartered Evergrande, which is reeling under more than $300 billion in liabilities, has left its offshore investors in the dark about repayment plans after already missing three rounds of interest payments on its dollar bonds.
Xia’s talks with investment banks and creditors in Hong Kong has not previously been reported.
Evergrande Group’s chief executive is holding talks in Hong Kong with investment banks and creditors over a possible restructuring and asset sales, two people said, as the Chinese developer battles against default on more than $300 billion in debts. (Reuters / Reuters Photos)
One of the sources said Xia needed to communicate with foreign banks on loan extensions and repayments. The source declined to disclose the identity of the creditors that Xia had spoken to in recent days.
“Xia also needs to sort out how many off-balance sheet debts the group has offshore, because many were underwritten at subsidiary levels and he himself may not be even aware of (that),” he said. “Before that they cannot work on restructuring and talk to bondholders.”
Evergrande has been scrambling to divest some of its assets to raise cash – efforts that have not yet yielded much success – as concerns have grown in recent weeks about a possible collapse and the impact on global markets and China’s economy.
Chinese state-owned Yuexiu Property has pulled out of a proposed $1.7 billion deal to buy Evergrande’s Hong Kong headquarters building over worries about the developer’s dire financial situation, Reuters reported on Friday.
BEYOND EVERGRANDE, CHINA’S PROPERTY MARKET FACES A $5 TRILLION RECKONING
A Chinese central bank official said on Friday the spillover effect of Evergrande’s debt problems on the banking system was controllable and the risk exposures of individual financial institutions were not big.
Evergrande and Xia did not respond to Reuters requests for comment.
The sources, who have direct knowledge of the development, declined to be named due to the sensitivity of the matter.
PUBLIC APPEARANCE
Evergrande Chairman Hui has not appeared in public in recent weeks or announced plans to address the group’s woes, leaving investors wondering if they would have to book losses when the 30-day grace periods end this month for unpaid bond coupons.
Last month, the developer issued a statement saying Hui had urged company executives to ensure the quality delivery of properties and redemption of wealth management products.
Xia, who is also vice president of the board, joined the company in 2007 and is responsible for Evergrande’s capital operation and management, as well as legal affairs and overseas affairs, according to the company’s website.
He has been in Hong Kong since July, according to one of the sources. The second source said Xia had been meeting Chinese investment banks in the city to explore possible asset sales.
Evergrande, once China’s top-selling developer, has said that it is looking to dispose of stakes in assets including its services and electric vehicle units to raise funds.
The developer is finalising details to sell 51% of its Evergrande Property Services unit to Hopson Development for HK$20 billion ($2.57 billion).
GET FOX BUSINESS ON THE GO BY CLICKING HERE
Investment bank Moelis & Co and law firm Kirkland & Ellis, representing bondholders who currently hold $5 billion worth of Evergrande nominal offshore bonds, demanded last week more information and transparency from Evergrande.
The developer said last month it had appointed Houlihan Lokey and Admiralty Harbour Capital as joint financial advisers to examine its financial options, as it warned of default risks amid plunging property sales.
($1 = 7.7792 Hong Kong dollars)