A group of China Evergrande’s international bondholders threatened to move forward with a legal enforcement plan that could include liquidation of the company’s assets
Bondholders are still holding out for Evergrande to step forward and provide them with detailed financial information about the company’s balance sheet, liquidity and present operations before taking any enforcement actions, according to two people close to the bondholder group. It is hoping to discuss possible debt maturity extensions or standstill agreements so that a restructuring proposal can be formulated over the coming months, one of the people said.
If the status quo continues, legal action is likely to take place first in the Cayman Islands, although there are other jurisdictions where bondholders could assert claims, the person said. Evergrande is incorporated in the Cayman Islands, and has some subsidiaries incorporated in the British Virgin Islands, though most of its assets are in mainland China.
The group “believes it has been left with no option but to seriously consider enforcement actions,” the statement said. It said it “has received little more than vague assurances of intent, lacking in both detail and substance” from Evergrande. The group has retained Harneys, an offshore law firm, and “is prepared to take all necessary actions to vehemently defend its legal rights and protect its legitimate interests,” the statement added.
The next steps the advisers are considering are accelerating debt, filing a type of bankruptcy document known as a winding-up petition and beginning a liquidation process, according to a person familiar with the matter. Under liquidation, control of the company would shift to a legal controller, subject to court supervision, the person said.
Evergrande said in a regulatory filing on Friday that a risk-management committee at the company is “actively looking for solutions and communicating with its creditors.” The committee also proposed to engageand BOCI Asia Ltd. as financial advisers and Zhong Lun Law Firm LLP as a legal adviser. Evergrande said they plan to address creditors’ demands and deal with the company’s debts “on a fair and equitable basis.
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