Evergrande debt crisis: International creditors threaten legal action over ‘opaque’ restructuring process
They said in a statement on Thursday that they had to “seriously consider enforcement action” after Evergrande failed to engage substantively with them on the reorganization of its operations.
The company’s “lack of commitment and opaque decision-making to date runs counter 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 firm’s behavior “tarnishes offshore investors’ views” on expecting fair treatment when investing in Chinese companies, and added that they were “prepared to take all measures necessary to vehemently defend its legal rights and protect its legitimate interests”.
The property developer is one of China’s largest and is still reeling from more than $300 billion in total liabilities, including around $19 billion in outstanding offshore bonds held by international asset managers and private banks on behalf of their clients.
But international bondholders say they have been left in the dark about the company’s plans. Creditors said in their Thursday statement that they attempted to speak with Evergrande, but received “little more than vague assurances of intent, lacking both detail and substance.”
“Actions speak much louder than words,” they added, saying the “overriding impression” is that despite the company’s public remarks, Evergrande “has ignored its offshore creditors and the legal rights of its creditors.” .
The group added that it recognized Evergrande’s recent efforts to resume most of its construction projects and wanted to “be part of a solution” to help “during these difficult times”.
Analysts have long feared that a collapse in Evergrande could trigger greater risks for China’s property market, hurting homeowners and the wider financial system. Real estate and related industries account for up to 30% of the country’s GDP.