Evergrande offshore creditors fear default

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

Evergrande, which could trigger one of China’s largest defaults as it wrestles with debts of more than $US300 billion ($A410 billion) and whose troubles have already sent shockwaves across global markets, missed payments on US dollar bonds, worth a combined $US131 million, that were due on September 23 and September 29.

With Evergrande staying silent on US dollar debt payments and prioritising onshore creditors, offshore investors have been left wondering if they will face large losses at the end of 30-day grace periods for last month’s coupons.

A group of bondholders have enlisted investment bank Moelis & Co and law firm Kirkland & Ellis to advise them.

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

“We all feel that an imminent default on the offshore bonds is or will occur in a short period of time,” Grisel said on a call with bondholders on Friday.

“Unfortunately, so far, we have had a couple of calls with the advisers” but there had not been any “meaningful dialogue with the company or provision of information,” he said

Evergrande, which faces nearly $US150 million in offshore payment obligations next week, did not respond to a Reuters request for comment

Neil McDonald, a restructuring partner in the Hong Kong office of Kirkland & Ellis, said the bondholders would like more transparency and hoped Evergrande would meet disclosure obligations under stock listing rules.

The offshore bondholders are also demanding more information about Evergrande’s plan to divest some businesses and how the proceeds would be used, the advisers said, adding that the creditors group they represent was growing.

The two advisers said that, including the parties that have expressed an interest to be part of the group, they represent bondholders who currently hold $US5 billion worth of Evergrande nominal offshore bonds.

Evergrande said last month it would sell a $US1.5 billion stake it owns in Shengjing Bank Co Ltd.

The bank, one of Evergrande’s main lenders, demanded cash from the sale go towards settling the developer’s debts with Shengjing.

Trading in Evergrande shares has been halted since Monday pending a major deal announcement.

Trading in its Evergrande Property Services Group unit was also halted.

China’s state-backed Global Times said Hopson Development was to acquire a 51 per cent stake in Evergrande Property for more than HK$40 billion ($A7.0 billion), citing other media reports.

“Whilst we don’t want to overstate this, we are obviously at this point in time preparing contingency plans to ensure that there are no dissipation of assets,” McDonald said.

“And if there is such activity, we will be prepared to take steps to protect the rights and interests of US creditors, and we really hope that that’s not necessary,” he added.

The advisers for offshore Evergrande bondholders had reached the developer on September 16 but had not received any assurance from the developer, demanding more transparency.

In another development, Evergrande US-dollar-bond trustee Citi has hired law firm Mayer Brown as counsel, a source familiar with the matter – who declined to be named – told Reuters earlier on Friday.

Citi and Mayer Brown declined to comment.

The possible collapse of one of China’s biggest borrowers has triggered worries about contagion risks in the world’s second-largest economy, with other debt-laden property firms hit by rating downgrades on looming defaults.

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