Evergrande creditors fear imminent default as concerns shake sector

SHANGHAI/SINGAPORE/HONG KONG -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 said.

Evergrande, which could trigger one of China’s largest defaults as it wrestles with debts of more than $300 billion and whose troubles have already sent shockwaves across global markets, missed payments on dollar bonds, worth a combined $131 million, that were due on Sept. 23 and Sept. 29.

With Evergrande staying silent on 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. 

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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, said Bert Grisel, a Hong Kong-based managing director at Moelis.

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 said. Photographer: Kyle Lam/bloomberg (Kyle Lam/bloomberg / Getty Images)

“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 $150 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.

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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 $5 billion worth of Evergrande nominal offshore bonds.

Evergrande said last month it would sell a $1.5-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% stake in Evergrande Property…