Evergrande Dollar-Bond Trustee Citi Hires Mayer Brown as Counsel

(Bloomberg) -- A unit of Citigroup, the trustee to a large chunk of China Evergrande Group’s dollar bonds, has retained law firm Mayer Brown to help navigate the unraveling of the world’s most indebted developer, according to people with knowledge of the situation. 

Evergrande is moving toward what would be one of China’s biggest restructurings after failing to make two coupon payments on dollar bonds in the past two weeks, as well as on the principal payment for a dollar note that matured Oct. 3. 

There was no immediate response from Evergrande to an emailed request for comment sent after business hours. Mayer Brown didn’t respond to request for comment, and Citi declined to comment.

Advisers to some dollar bondholders scheduled a conference call for Friday at 6:30 a.m. in New York to discuss strategy and broaden the group, said the people. The group, advised by Kirkland & Ellis and Moelis & Co, represents investors with roughly $2.5 billion in holdings, the people said.

Representatives at Kirkland didn’t respond to request for comment, while Moelis declined to comment. The call details were previously reported by Debtwire.

A dearth of juicy yields has lured some U.S. funds to buy Evergrande’s bonds. Marathon Asset Management, for example, is betting on gains from an overhaul of the company. 

But unlike a typical restructuring in the U.S. or Europe, corporate defaults in China could create a protracted process, complicated by the Chinese government’s interests in avoiding a systematic financial crisis, while punishing companies with excessive debt.

Some investors are seeking to send a notice to Evergrande and its lawyers to request payment of notes they say are guaranteed by the developer. The bond was issued at an initial amount of $260 million by Jumbo Fortune Enterprises, and nonpayment of principal payment within five business days may trigger a default. White & Case is advising various holders of Jumbo Fortune.

Evergrande could seize on recent positive developments, such as potential asset sales, to buy time to fix its offshore funding issues, according to a note by Bloomberg Intelligence credit analyst Daniel Fan on Thursday. 

Stock trading of Evergrande and its property-services arm were halted on earlier reports that the developer agreed to sell a controlling stake its property-management arm to Hopson Development Holdings, with a valuation of more than HK$40 billion ($5.1 billion). 

Meanwhile, Chinese Estates Holdings Ltd., controlled by billionaire Joseph Lau, a long-time backer of Evergrande, has offered to take the company private. 

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