China Evergrande creditors fear imminent default as advisers call for clarity

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China Evergrande Group offshore bondholders are concerned it is close to defaulting on loan payments and want more information and transparency from the cash-strapped property developer, their advisers said.

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Evergrande, which could trigger one of China’s biggest defaults as it wrestles with more than US$300 billion in debt and whose troubles have already sent shock waves across global markets, has hit US dollar bonds. But the payment was missed, costing a combined US$131 million. were to be held on 23 September and 29 September.

With Evergrande remaining silent on U.S. dollar debt payments and prioritizing onshore creditors, offshore investors have wondered whether they will face major losses at the end of the 30-day grace period for last month’s coupons.

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A group of bondholders founded the investment bank Moelis & Co. and has listed the law firm Kirkland & Ellis to advise.

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Moelis’ Hong Kong-based managing director Bert Grisel said offshore bondholders want to engage “constructively” with the company, but are concerned about a lack of information from China’s best-selling property developer.

“We all think that an imminent default on offshore bonds will or will happen in a short period of time,” Mr. Grisel said on a call with bondholders on Friday.

“Unfortunately, so far, we have had a few calls with consultants,” but there had been no “meaningful conversations or provision of information” with the company, he said. Evergrande, which faces about US$150 million in offshore payment obligations next week, did not respond to a Reuters request for comment.

Neil McDonald, a restructuring partner at Kirkland & Ellis’ Hong Kong office, said bondholders want more transparency, and hope Evergrande will meet disclosure obligations under stock listing rules.

Offshore bondholders are seeking more information about Evergrande’s plan to divest some businesses and how the proceeds will be used, with advisors saying the creditor group they represent was growing.

The two advisors said that, including parties that have expressed interest to be part of the group, they represent bondholders who currently hold US$5 billion worth of Evergrande nominal offshore bonds.

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Evergrande said last month that it would sell a US$1.5 billion stake in Shengjing Bank Co Ltd. The bank, one of Evergrande’s main lenders, sought cash from the sale, which goes toward settling the developer’s debts with Shengjing.

Trading in Evergrande shares has been halted since Monday pending the announcement of a big deal. Business in its Evergrande Property Services Group unit also came to a standstill.

China’s state-backed Global Times said Hopson Development was to acquire a 51 percent stake in the Evergrande property for more than US$5.1 billion, citing other media reports.

“While we don’t want to exaggerate this, we are obviously working out contingency plans at this time to ensure there is no wastage of assets,” said Mr. McDonald. “And if such activity occurs, we will be prepared to take steps to protect the rights and interests of American creditors, and we really hope that is not necessary,” he said.

Advisors to the offshore Evergrande bondholders had reached out to the developer on September 16, but had not received any assurances from the developer, demanding more transparency.

In another development, the City of Evergrande dollar-bond trustee has hired law firm Mayor Brown as an attorney, a source familiar with the matter, who declined to be named due to the sensitivity of the case, told the media earlier on Friday. told Reuters.

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City and Mayor Brown declined to comment.

The potential collapse of one of China’s biggest borrowers has raised concerns about contagion risks in the world’s second-largest economy, with other debt-laden property firms facing rating downgrades over looming defaults.

Bonds and shares in Chinese property developers fell again on Friday, with few clues as to how local regulators propose to halt the transition from Evergrande.

“The potential lack of transparency and clarity is further troubling investors and it will be very difficult for people to refinance any debt that is coming into that particular sector,” said Cliff Corso, chief investment officer at Advisors Asset Management.

An index tracking China’s asset sector fell 1.53 percent, compared to a 1.31 percent blue-chip share rise.

The Shanghai Stock Exchange on Friday suspended trading of two bonds issued by smaller developer Fantasia Group China Co, which fell more than 50 percent after controlling shareholder Fantasia Holdings Group, which was valued at US$206 million. The international market missed the loan payment deadline. Monday.

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Fantasia Holding said in a stock exchange filing on Friday that it had appointed Houlihan Loki and Sidley Austin as its advisors to assess its capital structure, evaluate liquidity and explore solutions to ease its current liquidity issue.

Most of Evergrande and Fantasia’s bonds have already lost about 80 percent of their value.

Meanwhile, bonds issued by Greenland Holdings, which has built some of the tallest residential towers in the world, including Sydney, London, New York and Los Angeles, and Cassa Group both had another blunder on Friday.

Chang Wei Liang, credit and FX strategist at DBS Bank, said in a note, “Market participants are questioning whether this could be a precursor to voluntary defaults by other developers with healthy short-term liquidity conditions, but large volatile long-term. Loan”. .

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