Evergrande’s Offshore Bondholders Brace for Default, Fight for Transparency on Assets

As offshore bondholders become more weary of a lack of communication from Evergrande and a potentially subsequent default, a group of them have turned to investment bank Moelis & Co and law firm Kirkland & Ellis to help gain more transparency from the collapsing property developer.

According to Bloomberg, both Moelis & Co and Kirkland & Ellis are in the midst of advising several clients, of whom are holding a combined $2.5 billion worth of Evergrande offshore debt. The advisors have been attempting to communicate with the real estate developer since September 16 via letters requesting additional information on Evergrande’s financial situation, and confirmation that the company won’t liquidate its offshore assets until a solution is determined.

Thus far, the two advisory firms have yet to receive a substantial response. In the meantime, a Kirkland lawyer told Bloomberg that they are working with global offshore law firm Harneys to explore legal options in the Cayman Islands, where the parent company of Evergrande is listed. The offshore bondholders are facing a difficult task ahead, not only due to Evergrande’s surmounting debt pile, but also because the company’s restructuring affects various jurisdictions, including New York, China, Hong Kong, and the Cayman Islands.

The latest efforts come as Evergrande failed to make interest payments on offshore bonds due September 23 and September 29, effectively entering the 30-day grace period before an official default is declared. Evergrande’s shares have been halted since Monday pending a major announcement regarding Hopson Development acquiring a 51% stake in the indebted real estate company, but no new developments have surfaced since.

Offshore bondholders are growing increasingly worried that they may be the last to receive payment in a restructuring. Given the enormous $300 billion debt pile that Evergrande has accumulated, onshore creditors, homebuyers, and unpaid contractors will be the first to receive reimbursement during a restructuring, which could take many months given the company’s financial complexity.

Information for this briefing was found via Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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