China Evergrande has proposed a new debt restructuring plan for offshore bondholders, offering to swap their debts into about a 30% equity stake in each of the developer’s two Hong Kong-listed subsidiaries, according to two sources familiar with the matter.

The property firm’s offshore bondholders holding about $19 billion of debt are likely to take a major haircut on their investments if they agree to the new terms, said the two sources who declined to be named because they were not authorised to speak with media. Evergrande did not respond to a request for comment.

The property developer’s dollar bonds last traded at about 2.25 cents on the dollar on Tuesday, according to LSEG data, as bondholders weigh the possible recoveries in the revised restructuring plan against other options like a winding up.

A lawyer for representing an ad hoc group of key bondholders told a Hong Kong court on Monday the restructuring plan could have a higher recovery rate for creditors than a liquidation scenario of less than 3%.

Shares in the units the bondholders will be offered the stake in, Evergrande Property Services Group and Evergrande New Energy Vehicle Group (NEV), have fallen by more than 80% this year amid Evergrande’s debt woes.

Their combined market value was only around HK$9 billion ($1.15 billion) as of Wednesday morning, with the parent holding 52% of the property arm and 59% of the vehicle firm.

Creditors would be given existing shares of the two units, the first source said, in a deal that would need to be approved by Chinese regulators.

The new plan was raised with some bondholders about two weeks ago, the first source added, after Evergrande’s original debt restructuring plan was thrown off course when its billionaire founder Hui Ka Yan was in late September confirmed to be under investigation for suspected criminal activities.

China Evergrande granted final reprieve as winding-up hearing adjourned

Evergrande was also banned from issuing new dollar bonds, a key part of its original restructuring plan, while its flagship mainland unit was being investigated by regulators.

The second source said the new plan was driven by a work committee under the southern Guangdong provincial government that has been overseeing Evegrande’s restructuring since late 2021, after the developer defaulted on its debts. The provincial government did not respond to a request for comment.

The renewed proposal will be key to Evergrande’s survival as the company was on Monday ordered by a Hong Kong court to form a concrete debt restructuring plan before a liquidation hearing on Dec. 4, which will decide whether it should be wound up.

Evergrande’s original plan, which was backed by the ad hoc group of bondholders before it was thrown off course, offered options including equity-linked instruments backed by the parent Evergrande and the two Hong Kong-listed subsidiaries.

Creditors were allowed to either swap all of their holdings into new notes with maturities of 10 to 12 years, or convert them into different combinations of new notes with tenors of five to nine years and equity-linked instruments, with no direct haircut.

The biggest challenge ahead for Evergrande will be convincing its creditors and shareholders in the two Hong Kong-listed units that the new proposal is worthwhile, industry experts said.

A key group of creditors, categorized as Class C by Evergrande, including private lenders, some Chinese banks and pre-IPO investors had opposed the old plan and demanded better terms before it collapsed.

The ad hoc group of bondholders is unhappy about the revised terms offering equity in the Hong Kong-listed subsidiaries, according to sources.