A group of international bondholders in embattled Chinese property developer Evergrande have hired an offshore law firm and warned of legal action if the company continues to refuse to “substantive engagement” over its finances and restructuring plans.
The group of unnamed bondholders, which describe themselves in a statement as “large and reputable international investors with deep experience and high standing in the international capital markets”, said they have been forced to consider legal action after repeatedly receiving “little more than vague assurances of intent, lacking in both detail and substance”.
Operating under the acronym AHG, the group have added offshore law firm Harneys to its roster of advisers, which also includes lawyers Kirkland & Ellis and investment bank Moelis, who have been working with the bondholders since September.
China’s second-biggest property developer, Evergrande has nearly $20bn of international market bonds that have been deemed to be in cross-default by ratings firms after missed payments, and has more than $300bn in total liabilities.
“The AHG believes it has been left with no option but to seriously consider enforcement actions,” the bondholders said in a statement released on Thursday. “The AHG is prepared to take all necessary actions to vehemently defend its legal rights and protect its legitimate interests.”
The bondholder group complained in October of a lack of engagement from Evergrande, which in December set up a risk management committee and repeatedly promised to engage with all stakeholders.
Evergrande, which is embarking on one of China’s biggest ever restructuring processes, has now resumed work at more than 90% of its projects. However, the bondholder group said that it needs full transparency on the company’s plans and wants it to halt more asset sales unless it is consulted.
“The AHG recognises the group’s recent efforts in resuming over 90% of its construction projects, and want to be a part of a solution to help the group during these hard times,” the letter said. “In this respect, the AHG requests the group to promptly engage with the AHG, provide full transparency in relation to the group’s financial position and liabilities and refrain from making any further asset disposals without consulting the AHG.”
The bondholder group said it hoped that by making a public statement, and threatening legal action, it would “prompt immediate, meaningful and substantive actions and not just words” from Evergrande.