China Evergrande facing criminal probe

An allegation of criminal conduct has been filed against the directors of China Evergrande, Asia Markets can reveal.

Dr Marco Metzler, a credit analyst and Evergrande creditor, is accusing the Chinese property giant of committing insolvency fraud in documents submitted to the Director of Public Prosecutions in the Cayman Islands.

“The company defaulted in December … but the directors did not file for bankruptcy in the Caymans, where the group his headquartered,” Dr Metzler said.

“(Therefore) they are in breach of their duties (and this is) a crime in the Caymans. We have reported this to the public prosecutor to start an investigation.”

Dr Marco Metzler
Credit analyst Dr Marco Metzler

Dr Metzler says he’s doing this to ensure Evergrande is declared bankrupt and goes into a default status with the ratings agencies.

“Hopefully we will bring this to an end, I’m committed to that,” Dr Metzler said.

“This takes time. To be declared bankrupt by the court can take another three to four weeks.”

Acting ‘for all creditors’

Dr Metzler, who has been outspoken in his criticism of Evergrande since its troubles became widely publicised last year, says his team sees itself as the “trustee” of all international Evergrande creditors.

“In order to reduce the cost risk for each claimant, we are offering other international and national creditors to join our proceedings,’ Dr Metzler said.

“As the management of Evergrande Holding has so far failed to initiate insolvency proceedings, there is a strong suspicion that the directors of Evergrande have caused substantial pecuniary loss to the company’s creditors through deception and breaches of their duty of care.

“Such conduct is punishable according to the Cayman Islands Criminal Code!”

Dr Metzler says it is now the responsibility of the local authorities to investigate the case and hold the directors personally liable.

“We have to prevent further asset transfers to the detriment of international creditors,” Dr Metzler said.

“The company has already sold shares and assets several times in a distress sale, knowing full well that it was making losses.

“Worse still, in recent months there have been multiple illegal transfers of assets, causing significant damage to us as international creditors, as this illegal action is likely to have severely impacted their chances of recovering their assets.

“As more and more distress sales are taking place and overdue bond interest is repeatedly not paid to foreign investors, we had to act in our own interest but also in the interest of all international creditors.”

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