(Bloomberg) -- A Hong Kong court on Wednesday dismissed a petition to liquidate Chinese education firm XJ International Holdings Co., dealing a blow to a group of bondholders that includes some of Asia’s most prominent hedge funds.
Deputy High Court Judge Doreen Le Pichon threw out the wind-up petition on technical grounds, saying that XJ had shown there is a dispute that a put option hadn’t been properly exercised, according to a judgment dated Aug. 28 posted on the judiciary’s website.
The ruling is a major setback for creditors who previously argued that XJ’s default could set a precedent for other Chinese issuers to refuse to repay debt even if they have the resources to do so.
The wind-up petition was filed in March on behalf of the group of creditors, which includes Hong Kong-based Oasis Management Co., PAG and Enhanced Investment Products Ltd.
An XJ unit issued convertible bonds in 2021 guaranteed by the company, with a due date in 2026. The firm defaulted on $315 million of convertible notes in March, after it failed to make an optional redemption payment.
In a statement, an ad hoc group representing international creditors said the decision may cast doubt on the validity of a myriad of other corporate actions and could lead to valid put instructions being disregarded.
There was no immediate response from a legal representative for the company.
It said in February that it had received notice from some bondholders that they planned to exercise their put options in March, and warned that it “may have difficulty in fully redeeming” the bonds.
Sichuan-based XJ operates 24 schools, including universities, junior colleges and vocational institutes that are mostly in China.
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