Bond investors put pressure on underwriter ICBC in case of Evergreen bond default

SHANGHAI (Reuters) – Industrial and Commercial Bank of China Ltd. (ICBC), the main underwriter of a defaulted bond from shipbuilder Evergreen Industries Holding Group, will hold a second meeting with debt investors this week following charges that he failed to comply with due diligence and disclosure conditions.

The logo of Industrial and Commercial Bank of China Ltd (ICBC) is seen at its branch in Beijing, China on March 30, 2016. REUTERS / Kim Kyung-Hoon / File Photo

Evergreen’s default in May, along with several other prominent state-owned companies recently, has raised concerns that local governments and Beijing will not bail out bondholders, causing angry investors to shoot instead. the subscribers.

ICBC on Friday posted a notice announcing the meeting in the coastal city of Ningbo on the website of one of China’s major bond clearinghouses.

But in a separate letter to ICBC seen by Reuters, the bondholders requested that the ICBC headquarters, rather than the underwriting Ningbo branch, take over the meeting and explain why the financial and legal problems of the subsidiaries of ‘Evergreen were not disclosed earlier.

Although an Evergreen subsidiary did not repay a 49.4 million yuan ($ 7.49 million) loan to the China Merchants Bank in December, Evergreen did not publicly disclose this information to bond investors until ‘in March. Evergreen also had several bank loans outstanding with ICBC in early 2016, according to Shanghai clearinghouse documents.

“What was ICBC doing all this time,” said an Evergreen bondholder who attended the initial bondholder meeting after the default on May 17 in Ningbo.

“Were they acting in the interest of their own outstanding loans or in the interest of bondholders? “

Bondholders are also unhappy that Evergreen’s May 2015 prospectus did not mention a corruption investigation at Evergreen’s Canadian unit, MagIndustries Corp, in early 2015. MagIndustries was delisted from the Stock Exchange. from Toronto in August.

A media spokeswoman at ICBC headquarters reached by phone declined to comment, while the fax request for comment also went unanswered. Guo Mengjin, an employee of the Ningbo ICBC Branch Legal Department, also declined to comment.

Zhao Xiabo, listed as Evergreen’s contact person for the bondholder meeting announcement, told Reuters: “Our business has not performed well for the past five or six years and the overall funding environment is not good. “

“These investors know they can’t get any more money from us. And there have been precedents that investors could get money from underwriters. “

After years in which investors believed nearly all corporate bonds had implicit government support, defaults have risen sharply over the past year and a half.

A senior official at the International Monetary Fund warned on Tuesday that China must quickly tackle its huge corporate debt burden, now estimated at around 145% of gross domestic product. ($ 1 = 6.5925 Chinese yuan)

Additional reporting by the Shanghai Newsroom; Editing by Jacqueline Wong

Carol M. Barragan

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