Troubled property developer not sharing information on asset disposal, restructuring plans, say bondholder advisors
Investment Bank Moelis & Co. And representatives from law firm Kirkland & Ellis LLP, which is advising a group of Evergrande bondholders, held an online meeting Friday that was attended by hundreds of investors, including managers of hedge funds, mutual funds and major banks.
“We had a few calls with advisors, but no meaningful conversations or additional information with the company,” Moelis Managing Director Bert Grisel told hundreds of meeting attendees. “We have almost two weeks left, there is a situation of urgent need to press the issue,” he said.
So far, Evergrande has not engaged with bondholders’ advisors, according to a person familiar with the matter. Several legal letters were sent to the company since the first bond payment was missed. Evergrande responded this week, but without providing any meaningful information, he said.
Evergrande and its advisors—including US restructuring specialist Houlihan Loki—are not forthcoming about the company’s recently announced asset-sale plans, which, according to Moelis and Kirkland and Ellis, will focus on recovery prospects for international bondholders. may have an adverse effect.
Prices for some of Evergrande’s dollar bonds have fallen between 15 cents and 25 cents on the dollar, deeply distressing levels that indicate offshore creditors are frustrated with how much money they can recover from the company.
Evergrande reported the equivalent of more than $300 billion in liabilities at the end of June, including about $89 billion in interest-bearing debt. The developer had recently said that it has had trouble making payments to contractors and suppliers of construction materials, leading to delays in construction. It owes large sums of money to its employees and individual investors in China to whom it sold investment products.
A committee of bondholders being advised by Moelis and Kirkland & Ellis includes global funds, asset managers and distressed investors who together hold Evergrande debt with a face value of $2.5 billion. Moelis said it is in touch with more noteholders holding the same amount, which could bring the total estimated amount to $5 billion. One purpose of Friday’s call was to garner support from more Evergrande bondholders.
Evergrande revealed in late September that it had entered into an agreement with a Chinese state-owned enterprise to sell a portion of its stake in Shengjing Bank. Co.
For the equivalent of $1.55 billion. According to a regulatory filing, the commercial bank demanded that Evergrande use the net proceeds from the stake sale to clear dues to the developer.
“This is a transaction that can be treated as preferential treatment of that creditor,” Mr Grisel said on Friday.
Earlier this week, Evergrande’s asset-management unit said it may be subject to a takeover bid, another deal that could raise cash for the parent company.
“What we don’t want is a situation where so-called offshore assets are being monetized in some way and the value of those assets is being leaked to other parties, whether onshore or elsewhere,” said Neil McDonald, a restructuring partner Kirkland & Ellis said during the investor call.
Mr McDonald said he had reminded Evergrande and her advisers of her fiduciary duties, which require them to protect assets and treat creditors equally. He said the Kirkland & Ellis law firm is working with Harney as part of a contingency plan in case Evergrande fails to protect creditor rights.
Bond prices of several Chinese property developers have fallen after Evergrande defaulted its interest payments and Fantasia Holdings Group Co.
, another Shenzhen-headquartered developer, failed to repay a $206 million five-year dollar bond.
Selling intensified over the past few days, as junk-rated bonds of dozens of developers fell in price amid fears of more defaults. Weak September sales numbers contributed to the malaise of the market.
According to Tradeweb, the 9.375% bond in 2024 of Chinese property developer Casa Group Holdings fell 28 points from the start of the week, wiping out a third of its value. Dollar bonds sold by Redson Properties Group lost 16 points this week. Yields on the ICE BofA index of high-yield bonds of Chinese companies rose to 19.8% on Thursday, the highest in more than a decade.