China Evergrande Group said on Friday that it was hiring more financial and legal advisers to help it with demands from creditors, after a key group of bondholders threatened to take legal action if it did not show more urgency to resolve a default.
Evergrande is the world’s most-indebted property company, with more than $300 billion in total liabilities, which include nearly $20 billion of international bonds all deemed to be in default after a run of missed payments late last year.
Its rocky financial situation has roiled other Chinese property developers over the past year and exacerbated a funding squeeze in the sector.
In one positive sign, rival developer Country Garden surprised the market on Friday with a new issue of HK$3.9 billion ($500 million) in convertible bonds, after a similar attempt failed last week.
Country Garden, China’s top property developer by sales, said it would issue the bonds for refinancing debt that will become due within one year.
The bonds due July 2026 carry 4.95% interest and have the initial conversion price of HK$8.10 per share. At full conversion, the shares would represent 2% of the enlarged capital.
‘Lack of Engagement’
In a filing to the stock exchange, Evergrande said it was proposing to engage China International Capital Corporation and BOCI Asia as financial advisers and the Zhong Lun Law Firm as legal adviser.
The move came one day after an offshore creditor group, represented by law firm Kirkland & Ellis and investment bank Moelis, said it was ready to take “all necessary actions” to defend members’ rights after a lack of engagement by the firm at the heart of China’s property crisis.
The creditor group said in a statement on Thursday Evergrande has disregarded its offshore creditors and the legal rights of its creditors, and it had to “seriously consider” enforcement action.
Evergrande shares fell more than 3% in Asia on Friday. Its April 2023 dollar bond traded at 12.551 cents on the dollar, data by Duration Finance showed, bouncing after the news though still softer than overnight.
Stocks and bonds of Chinese property developers have gained this week on hopes a slew of recent government measures would help ease the sector’s funding squeeze and reverse a slump in construction, a key economic growth driver.
- Reuters, with editing by George Russell