In a restructuring proposal for cash-strapped Evergrande, the Guangdong authorities said on Jan. 21 that state-led investors should buy the company’s assets. The revenues from the sale of overseas assets should be used to repay foreign debt.
The Chinese property developer tyro has more than $300 billion in total liabilities, including roughly $20 billion in international bonds, all of which are deemed in default following a string of missed payments late last year.
According to Bloomberg, who reported from financial intelligence provider REDD, the Chinese regime is expected to wipe off 59.78% of the Evergrande stocks owned by its founder, Xu Jiayin, after the restructuring.
But Evergrande offshore bondholders are concerned that the plan poses risks to their legal rights and fails to engage them in the decision-making process.
According to Reuters, a group of international creditors of Evergrande said on Jan. 20 that the company “has disregarded its offshore creditors and the legal rights of its creditors.”
They said the company had given them “little more than vague assurances of intent, lacking in both detail and substance,” despite their attempts to be included in substantive negotiations.
The ad-hoc group, represented by law firm Kirkland & Ellis and investment bank Moelis, required that if Evergrande sells any more assets, it must discuss the matter with them. Overwise, they are prompted to “seriously consider enforcement actions.”
“The AHG (ad-hoc group) expects and calls on the directors (of Evergrande) … to strictly comply with their fiduciary duties which require them, amongst other things, to have regard to and act in the best interests of their creditors.”