Evergrande creditors threaten to file suit against “vague” restructuring plan

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Evergrande’s international creditors are running out of patience.

A group of the company’s bondholders abroad is threatening to take legal action over its “vague” debt restructuring process, the latest sign of trouble for the embattled Chinese developer.

They said in a statement on Thursday that they had to “seriously consider enforcement actions” after Evergrande failed to substantially engage with them over the reorganization of their operations.

The company’s “lack of engagement and opacity in decision making to date are contrary to well-established international standards in restructuring processes of this magnitude,” the group wrote in its statement.

Investors are represented by law firm Kirkland & Ellis and investment bank Moelis & Co.

They said the company’s behavior “tarnishes the view of offshore investors” about expecting fair treatment when investing in Chinese companies and added that they are “prepared to take all necessary steps to vigorously defend their legal rights and protect their legitimate interests.”

Evergrande did not respond to a CNN Business request for comment on the statement, but said in a Friday statement to the Hong Kong Stock Exchange that it would hire more financial and legal advisers to help “keep up” with creditors’ demands.

The real estate developer is one of China’s largest and still has more than $300 billion in total liabilities, including about $19 billion in offshore securities held by international asset managers and private banks on behalf of their clients.

Evergrande has been struggling for months to raise money to pay creditors, and the company’s chairman, Xu Jiayin, reportedly sold personal assets to shore up his finances.

But time seemed to be running out for the company last month when Fitch Ratings declared that Evergrande had defaulted on its debt — a downgrade that the ratings agency said reflected the company’s inability to pay interest due that month on two bonds. denominated in dollars.

There is also evidence that the Chinese government is guiding Evergrande through restructuring its debt and expanding business operations.

The company created a risk management committee last month made up of employees from state-owned companies in Guangdong, where Evergrande is headquartered, along with an executive from a large central government-owned bad debt management company.

But international bondholders say they have been left in the dark about the company’s plans. The creditors said in their Thursday statement that they had tried to talk to Evergrande but received “little more than vague assurances of intent, lacking detail and substance.”

“Actions speak considerably louder than words,” they added, saying the “prevailing impression” is that, despite the company’s public words, Evergrande “has disregarded its offshore creditors and the legal rights of its creditors.”

The group added that it recognizes Evergrande’s recent efforts to restart most of its construction projects and wants to “be part of a solution” to help “during these difficult times”.

Analysts have long feared that an Evergrande meltdown could trigger broader risks for China’s property market, hurting homeowners and the broader financial system. The real estate and related sector accounts for up to 30% of the country’s GDP.

Chinese policymakers have also made it clear that protecting homeowners is a priority as they want to ensure apartments are delivered to customers, many of whom had already paid for the properties before they were completed.

Last month, Wang Menghui – China’s Minister of Housing and Urban-Rural Development – told state broadcaster that supporting the delivery of residential projects and protecting people’s livelihoods were among the government’s top goals this year to address the risks. for the real estate sector.

Evergrande also made arrangements with domestic creditors to avoid a formal default on its onshore bonds. Earlier this month, it won investor approval to delay payments on a 4.5 billion yuan ($707 million) bond.

This content was originally created in English.

original version

Reference: CNN Brasil

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