By Anshuman Daga, Scott Murdoch and Clare Jim

SHANGHAI/SINGAPORE/HONG KONG (Reuters) -China Evergrande Group offshore bondholders are concerned that it is close to defaulting on debt payments and want more information and transparency from the cash-strapped property developer, their advisers said.

Evergrande, which could trigger one of China’s largest defaults https://www.reuters.com/article/china-evergrande-debt-property-bonds/update-1-building-default-fears-pummel-chinese-property-firms-idUSL8N2R433Z as it wrestles with debts of more than $300 billion and whose troubles have already sent shockwaves across global markets, missed payments on dollar bonds, worth a combined $131 million, that were due on Sept. 23 and Sept. 29.

With Evergrande staying silent on dollar debt payments and prioritising onshore creditors, offshore investors https://www.reuters.com/business/investors-grappling-with-evergrande-fallout-weigh-risk-wider-pain-2021-09-20 have been left wondering if they will face large losses at the end of 30-day grace periods for last month’s coupons. [nL8N2QP1H5]

A group of bondholders have enlisted investment bank Moelis (NYSE:) & Co and law firm Kirkland & Ellis to advise them.

Offshore bondholders would like to interact “constructively” and with the company. However, they are concerned by the lack of information about China’s former top-selling developer of property, stated Bert Grisel from Moelis, a Hong Kong managing director.

Grisel stated that all bondholders feel there is an imminent default of offshore bonds.

He said that although we had had “a few calls” with advisers, there was not been “meaningful dialog with the company nor provision of any information.”

Evergrande faces almost $150 million in offshore obligations and did not reply to Reuters’ request for comment.

Neil McDonald, a restructuring partner in the Hong Kong office of Kirkland & Ellis, said the bondholders would like more transparency, and hoped Evergrande would meet disclosure obligations under stock listing rules.

According to the advisors, they are asking for more details about Evergrande’s plans to sell some companies and the use of the proceeds.

They stated that they represented bondholders with $5 billion of Evergrande nominal offshore bonds.

Evergrande said last month it would sell a $1.5-billion stake it owns in Shengjing Bank https://www.reuters.com/world/china/china-evergrande-transfer-15-bln-stake-shengjing-bank-state-firm-2021-09-29 Co Ltd. Evergrande had been relying on the Bank as a lender, and demanded that the proceeds of the sale be used for Shengjing’s repayments.

In the wake of a significant deal, trading in Evergrande shares was halted on Monday. Also, trading in Evergrande’s Evergrande Property Services Group unit has been halted.

China’s state-backed Global Times https://www.reuters.com/business/china-evergrande-share-trading-halted-hong-kong-2021-10-04 said Hopson Development was to acquire a 51% stake in Evergrande Property for more than HK$40 billion ($5.1 billion), citing other media reports.

McDonalds said, “While we don’t wish to overstate it, we are evidently at this stage in time preparing emergency plans to ensure there is no dissipation assets.”

“And, if such activity occurs, we will be ready to take steps in order to protect U.S. creditor rights and interests, but we truly hope that it’s not necessary,” said he.

Although the advisers representing Evergrande bondholders offshore had made contact with the developer Sept. 16, they had not been given any assurance by the developer. They were requesting more transparency.

SECTOR LUMP

Another development is that Evergrande dollar bond trustee Citi hired Mayer Brown, a source who was familiar with the matter but declined to identify himself due to the sensitive nature of the matter.

Citi and Mayer Brown refused to comment.

Fears of contagion risk in China’s second largest economy have been raised by the collapse of China’s most important borrower. Rating downgrades for looming defaults will also be applied to other debt-laden property companies.

The price of shares and bonds in Chinese property developers fell again Friday, with little information about how Evergrande will be contained by local regulators.

Advisors Asset Management’s chief investment officer Cliff Corso stated that investors are becoming more cautious due to the lack of transparency. It will make it difficult for them to finance any debt they have.

An index measuring China’s property industry saw an increase of 1.53%, while blue-chip shares rose by 1.31%.

Shanghai Stock Exchange stopped trading in two bonds by Fantasia Group China Co on Friday. The one that fell over 50% was due to Fantasia Holdings Group’s failure to meet the Monday deadline for payment of $206 Million international market debt.

Fantasia Holding announced in a filing with the stock exchange that on Friday it appointed Sidley Austin and Houlihan Likey (NYSE) as advisers. They will help assess and evaluate the capital structure of Fantasia Holding and find ways to improve its liquidity.

Many bonds of Evergrande or Fantasia have lost approximately 80% of its value.

Greenland Holdings’ bonds were also beaten by Kaisa Group and Sydney. They have constructed some of the most impressive residential towers around the globe, including those in New York, Sydney and New York. [L8N2R433Z]

“Market participants are questioning if this may be a precursor for voluntary defaults by other developers with healthy short-term liquidity positions, but large unsustainable longer-term debt,” Chang Wei Liang, Credit & FX Strategist at DBS Bank, said in a note.