Chinese creditors sue Evergrande

Chinese creditors are suing embattled property developer China Evergrande Group for more than $13bn, it was reported on Thursday.

According to the Financial Times, citing official records, a Chinese court has accepted 367 civil lawsuits with claims totalling $13.2bn. The cases were submitted between 24 August and 9 December, which is when Fitch Ratings downgraded Evergrande to "restricted default" following the assumed non-payment of coupons due on two dollar bonds.

Fitch is the first ratings agency to declare Evergrande in default. An RD rating is applied when a company defaults on debt but has yet to enter administration or bankruptcy proceedings.

Bo Zhuang, an analyst at Loomis Sayles, told the FT: "Creditors are racing to take Evergrande to court so they can be in a better position to get their money back in the event of a debt restructuring."

Cash-strapped Evergrande has unsettled global markets for months as it struggled to meet interest payments, and the Hong Kong-listed stock has lost 89% of its value this year.

The stock closed 3% higher on Thursday, at HK$1.60, although it remains down 43% over the last month.

The crisis that has engulfed Evergrande - and an increasing number of its rivals - began after Beijing, looking to curb rampant consumer speculation and soaring debt, moved to crack down on China’s red-hot property sector.

Evergrande, which borrowed heavily from both domestic and international lenders to build up its property portfolio, has debts of around $300bn. It owns around 1,300 projects in more than 280 Chinese cities.

Should the company fail, international creditors will be vying with domestic creditors to secure repayment. Evergrande has issued offshore bonds totalling $19bn.

Also on Thursday, Bloomberg - citing unnamed people familiar with the matter - said regulators had ordered Evergrande to prioritise payments to workers and suppliers, to head off the risk of potential social unrest ahead of the Lunar New Year holidays, which start on 1 February. Evergrande has around 163,000 employees.