As Evergrande Default Looms, What Legal Options Do Offshore Creditors Have?

A traffic light is seen near the headquarters of China Evergrande Group in Shenzhen, Guangdong Province, China on Sept. 26, 2021. Aly Song/Reuters File Photo

LONDON/HONG KONG—With China Evergrande Group’s default deadline drawing closer, offshore bond investors in the property developer are pondering their legal options to safeguard their investments.

Below are some factors at play as offshore investors, with some $20 billion of Evergrande debt outstanding, gear up to deal with the potential fallout from what could become China’s biggest ever corporate default:

Do Evergrande’s Offshore Bonds Carry Any Guarantee From Issuer?

Chinese legal rules prevent mainland-incorporated parent companies from guaranteeing their subsidiaries’ offshore debt without going through a registration and approval process.