The nervousness of bondholders of the shaky real estate company China Evergrande is growing. Above all, foreign donors see their skins floating away and are preparing for imminent defaults. A group of creditors has therefore brought the investment bank Moelis & Co on their side as an advisor.
Offshore bondholders wanted to be “constructive” with the company but were concerned about the lack of information from the property developer, said Bert Grisel, executive manager at Moelis, on Friday.
“We are all of the opinion that an imminent default on the offshore bonds occurs or will occur in a short time,” said Grisel at a conference call with creditors. So far there has been no “meaningful dialogue with the company or the provision of information”.
Above all, the uncomfortable expiration of the payment deadlines for bonds denominated in dollars, while Chinese creditors are given priority, creates a feeling of unease. Evergrande did not want to comment on Reuters’ request.
The creditors also demanded more insight into the company’s plans to gain more room for itself financially by selling shares and how possible proceeds could be used, the financial advisors said. Evergrande shares have been suspended from trading on the Hong Kong Stock Exchange since Monday pending a possible sale of shares.
Investors fear the domino effect
The company has debts of more than $ 300 billion – in the coming week nearly 150 million in foreign debts are due. Evergrande has a grace period of 30 days for the interest due at the end of September.
Stockbrokers worry that the entire real estate industry could collapse if Evergrande goes bankrupt. Real estate bonds and stocks went downhill on Friday. The CSI 300 Real Estate Index fell 1.5 percent. Bonds from real estate companies such as Xiamen Yuzhou Grand Future Real Estate Development Co, China Aoyuan Group and Guangzhou R&F Properties also sagged. At Fantasia Holdings Group, two bonds were suspended from trading after the price of one of the securities plummeted by more than 50 percent.
Evergrande’s smaller rival Fantasia had missed a deadline for interest payments. “The potential lack of transparency and clarity is making investors cautious and it will be very difficult for people to refinance debt due in this particular sector,” said Cliff Corso, chief investment strategist at analyst Advisors Asset Management.