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Things are getting tighter for Evergande: A bondholder, Liechtenstein-based Financial Market Partners Capital (FMPC) Consulting AG, filed an allegation of criminal conduct on Friday, February 18, 2022 for insolvency fraud against the Cayman Islands-registered Evergrande holding company. FMPC Consulting AG was supported and advised - in addition to internationally active insolvency lawyers - by DMSA Deutsche MarktScreening Agentur GmbH. Background: Evergrande has defaulted on interest payments on so-called offshore bonds amounting to more than one hundred million US dollars on several occasions since mid-November. These are held by international investors, including FMPC Consulting AG. (Note to editors: More about FMPC Consulting AG and its investment in Evergrande bonds can be found at the end of this press release. ) On December 3, Evergrande officially admitted to international investors for the first time in an ad hoc announcement to the Hong Kong Stock Exchange - the holding company's home exchange - that there was "no guarantee that the Group will have sufficient funds to continue to meet its financial obligations." If a company domiciled in the Cayman Islands is insolvent or of doubtful solvency, its directors have a fiduciary duty under the laws and regulations applicable there to act in the interests of its creditors. They then also have to consider whether it is in the interest of their creditors to initiate reorganization or insolvency proceedings. 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, inter alia, under sections 248 et seq. of the Cayman Islands Criminal Code. DMSA Managing Director Michael Ewy explains, "With the allegation of criminal conduct, we are trying to save what can be saved for FMPC Consulting AG and other international creditors." At the latest with the official announcement of the default of the interest payment on December 6, 2021, the Evergrande directors had been obliged to file for voluntary or provisional insolvency at the court of the company's headquarters in the Cayman Islands. "To date, this has not happened despite multiple requests from us. As a consequence, we have now filed an allegation of criminal conduct with the Cayman Islands Public Prosecutor's Office for committing insolvency fraud." Thus, he said, it is now also the responsibility of the local authorities to investigate the case and hold the directors personally liable, as well as to have the insolvency determined by the authorities. The reasoning behind it: "Evergrande has defaulted, but has still not been officially declared completely insolvent," explains Dr. Marco Metzler, Chairman of the Board of Directors of FMPC Consulting AG. "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. If the local authorities do not officially declare insolvency, we intend to file a bankruptcy petition against Evergrande ourselves. This will happen as soon as we have an official, enforceable debt instrument against Evergrande in our hands. Until then, it may take a few more weeks." As FMPC Consulting AG sees itself as the trustee of all international Evergrande creditors and in order to reduce the cost risk for each claimant, the company is offering other international creditors to join its proceedings, which took another step forward yesterday with the filing of the allegation of criminal conduct in the Cayman Islands. Incidentally, Metzler and Ewy are not alone in their view: China Evergrande Group was already officially downgraded to "partially insolvent" by international rating agencies at the beginning of December. Thus, the rating agency Fitch has assigned Evergrande a status of "Restricted Default" (RD). Similarly, rating agency Standard & Poor's downgraded the real estate developer to "Selective Default" (SD). All 23 of Evergrande Group's international bonds are affected by this selective default. The only rating worse for both agencies is "Default" (D) - complete default. This rating will be assigned at the latest when the Evergrande Group has been officially declared insolvent by a court. This is exactly what FMPC Consulting AG and DMSA now want to achieve with their allegation of criminal conduct order to prevent further asset transfers to the detriment of international creditors. 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 the company's international creditors, as this illegal action is likely to have severely impacted their chances of recovering their assets. (continues)