SHANGHAI/HONG KONG Chinese developer Country Garden faces a call from some smaller onshore bondholders for the nullification of a deal to extend repayment of a bond, arguing it was unfair and illegal, according to sources and a document.
Country Garden's onshore bondholders approved its proposal for an extension on debt payments worth 3.9 billion yuan ($536 million) late on Friday, in a deal that pulled the company back from brink of a default and eased investors' concerns.
The financial woes of the country's No.1 private developer worsened the outlook for China's crisis-hit property sector, and the debt extension deal - and Beijing's new support measures for the industry - boosted market sentiment on Monday.
In Friday's vote on Country Garden's extension proposal, 56.08% of participating onshore creditors approved the deal, 43.64% opposed and 0.28% abstained, an official document shared with bondholders showed.
In a letter opposing the deal, which the sources said has been sent to Country Garden and seen by Reuters, some creditors complained the procedures of the bondholder meetings were unfair and in breach of rules and laws.
The letter said some important notices were sent only to selective bondholders, and that the meeting with some bondholders for the vote had been delayed multiple times without reasons being clearly explained.
Therefore, the letter said, the result should be nullified.
It was not immediately clear what impact the objections of the small bondholders will have on the repayment extension deal.
One of the bondholders, who signed the letter and declined to be named due to the sensitivity of the matter, said creditors wanted to voice their discontent and flag the process to regulators.
Chances, however, were slim for them to reverse the voting results, the bondholder said.
Country Garden declined to comment.
DeHeng Law Offices, a Beijing-based law firm that signed off Country Garden's voting results in a legal opinion letter sent to investors on Saturday, said the voting was held under legal procedures and the results were effective.
DeHeng didn't immediately respond to Reuters' request for comment.
The protest by some Country Garden creditors underscores how bumpy the debt restructuring process for the developer could be, as it faces multiple bond payment deadlines both onshore and offshore in coming months.
(Reporting by Shanghai Newsroom and Xie Yu in Hong Kong; Editing by Muralikumar Anantharaman and David Holmes)
