Evergrande could trigger one of China’s biggest defaults as it wrestles with missed payments on a $131M dollar bond with more than $300B in debt
Shanghai/Singapore/Hong Kong-China Evergrande Group offshore bondholders are worried it is close to defaulting on loan payments and wants more information and transparency from the cash-strapped property developer, their advisers said.
Evergrande, which could trigger one of China’s biggest defaults as it wrestles with more than $300 billion in debt and whose troubles have already sent shock waves across global markets, on dollar bonds Payments missed, which were due on September 23, amounted to a combined $131 million. and 29 September.
With Evergrande Dollar remaining silent on debt payments and prioritizing onshore creditors, offshore investors have been left wondering 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 enlisted investment bank Moelis & Co and law firm Kirkland & Ellis to advise.
Offshore bondholders want to engage “constructively” with the company, but are concerned about a lack of information about China’s best-selling property developer, said Bert Grisel, Moelis’ Hong Kong-based managing director.
“We all think an imminent default on offshore bonds will or will happen in the short run,” 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 $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.
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The two advisors said that, including parties that have expressed interest to be part of the group, they represent bondholders who currently hold $5 billion worth of Evergrande nominal offshore bonds.
Evergrande last month said it would sell its $1.5 billion stake in Shengjing Bank Co Ltd. The bank, one of Evergrande’s main lenders, sought cash from the sale, with Shengjing directed toward settling the developer’s debt.
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, citing other media reports, said that Hopson Development was to acquire a 51% stake in Evergrande Property for more than HK$40 billion ($5.1 billion).
McDonald’s said, “While we don’t want to exaggerate, we are clearly working out a contingency plan at this time to ensure there is no wastage of assets.”
“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.
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 dropped 1.53% against a 1.31% blue-chip share rise.
The Shanghai Stock Exchange on Friday suspended trading of two bonds issued by smaller developer Fantasia Group China Co, in which controlling shareholder Fantasia Holdings Group, after it missed a $206 million international market debt payment deadline on Monday .
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% 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.
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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”. .