SHANGHAI/HONG KONG (REUTERS) - China Evergrande Group said on Friday (Jan 21) that it was hiring more financial and legal advisers to help it with demands from creditors, after a key group of its international creditors 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 US$300 billion (S$404 billion) in total liabilities. These include nearly US$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. But in one positive sign, larger rival Country Garden surprised the market on Friday with a new issue of US$500.2 million convertible bonds, after a similar attempt failed last week.
In a filing to the stock exchange, Evergrande said it was proposing to engage China International Capital Corp and BOCI Asia as financial advisers, and 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 company at the heart of China’s property crisis.
The creditor group said in a statement on Thursday that Evergrande had disregarded its offshore creditors and the legal rights of its creditors, and that it had to “seriously consider” enforcement action.
Shares of Evergrande fell more than 3 per cent 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.
Property sentiment turning?
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.
Country Garden, China’s top property developer by sales, said it would issue HK$3.9 billion (S$674 million) of convertible bonds for refinancing debt that will become due within one year.
The bonds due in July 2026 carry 4.95 per cent interest and have the initial conversion price of HK$8.10 per share. At full conversion, the shares would represent 2 per cent of the enlarged capital.
Shares of Country Garden dropped nearly 6 per cent to HK$6.55 in the morning session after the news, while its Jan 2023 international bond rose to 97.021, up from 92.787 overnight.
The new issue follows a report that the developer failed to find appetite for a potential US$300 million convertible bond last Wednesday.
Beijing unexpectedly cut borrowing costs on its medium-term loans on Monday for the first time since April 2020 to ease pressure on the cooling economy. On Thursday, it cut its benchmark lending rates for corporate and household loans for a second straight month, and also lowered its mortgage lending benchmark rate.
