Business

Evergrande agrees to pay advisory fees to international bondholders

Evergrande has agreed to pay advisory fees to a group of international bondholders of the heavily indebted company after warning of potential legal action against the Chinese developer.

The agreement is with a group of bondholders advised by law firm Kirkland & Ellis and investment bank Moelis & Company, according to two people familiar with the matter.

It comes as Evergrande, following its default last year, is embarking on a restructuring process that has rocked China’s real estate sector and contributed to an economic slowdown in the country.

A representative of the bondholder group declined to comment. Evergrande advisers declined to comment.

The agreement comes weeks after bondholders asked lawyers to prepare for formal legal action against Evergrande after it was revealed that more than $2 billion in deposits had been made at one of its Hong Kong-listed subsidiaries confiscated by a mysterious lender.

The group in January commissioned law firm Harneys because she “had been given no choice but to seriously consider enforcement action” after complaining earlier in October about a lack of commitment.

A person close to Evergrande’s restructuring said an agreement by a defaulting company to pay creditors’ fees was common in a restructuring of this magnitude, but added that it was “unusual” for a company to agree payment terms so early agree on in the process.

Evergrande’s slow default, which began last September when the company first missed interest payments on international bonds but dragged on for months before a formal default was declared, was marked by a lack of disclosure and uncertainty about the company’s plans for survival.

The missing billions added to growing tensions between the company and its offshore investors, but the recent advisory fee agreement, first reported by the Wall Street Journal, is a rare positive development.

Evergrande has more than $300 billion in debt, of which only about $20 billion is offshore dollar-denominated bonds. The Chinese government has focused on completing work on its hundreds of projects, where homes have typically been sold to ordinary buyers before completion.

International investors have largely focused on the group’s various Hong Kong subsidiaries, hoping to recoup some of their investments.

Evergrande said in January that it aims to present a restructuring proposal to creditors within six months, but it is widely expected to take much longer to complete due to the complexity of the situation and the sheer size of its Chinese and international debt to make significant progress.

Hui Ka Yan, the billionaire founder of Evergrande and formerly China’s richest man, said the following month the company would do so Deliver 600,000 units in 2022 and ruled out a fire sale of assets.

https://www.ft.com/content/e801f827-5d95-4103-8835-27d3833a4ebc Evergrande agrees to pay advisory fees to international bondholders

Adam Bradshaw

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