Offshore Creditors of Evergrande May Have Chance to Recover Funds Through Onshore Subsidiaries: Experts

Offshore Creditors of China Evergrande Seek to Recover Funds from Onshore Subsidiaries

Offshore creditors of China Evergrande are exploring new avenues to increase their chances of recovering funds from the embattled property developer. Experts suggest that if these creditors can prove that Evergrande is due money from its onshore subsidiaries, to which they would be entitled, they might have a stronger case for recouping their investments.

The creditors, who became de facto shareholders of Evergrande’s onshore assets following a January liquidation order in Hong Kong, now have an opportunity to recover money from a company with offshore liabilities amounting to as much as $23 billion. This development comes as a ray of hope for creditors, considering that shareholders typically have the lowest priority when it comes to debt recovery.

In particular, creditors are focusing on two electric vehicle units and a property unit within Evergrande’s portfolio. If it is revealed that these subsidiaries have outstanding loans extended by Evergrande, the creditors could potentially have higher seniority in the debt recovery process.

According to Glen Ho, Deloitte China’s national turnaround and restructuring leader, offshore creditors have a legal right to claim back money if they can prove that Evergrande lent money to these onshore restructured businesses. Ho cited a similar case involving China Huishan Dairy, where offshore creditors received payouts through the restructuring of onshore subsidiaries.

The upcoming creditor meetings for Evergrande’s units will be crucial, as creditors must report details of money owed before the deadlines in October and November. However, the road to recovery may not be easy, as navigating the mainland restructuring process and resolving potential conflicts among creditors could pose challenges.

Despite the complexities involved, experts emphasize the importance of involving offshore investors in government-led bankruptcy processes to ensure transparency and justice. As the saga of Evergrande’s downfall continues, offshore creditors are hopeful that they can recoup some of their investments through the restructuring of onshore subsidiaries.