Hedge Funds Cry Foul Over Chinese Education Firm’s Default

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XJ said the cash on its balance sheet could only be used to run its schools, and that it has “a preliminary plan” to settle or restructure the defaulted debt.

(Bloomberg) — Hedge funds and other international investors are sounding alarms after a profitable education company from China defaulted on its convertible bonds in March.

A group of bondholders, which includes some of Asia’s most prominent hedge funds, have alleged in public statements that the company chose not to pay its offshore debt even though its business is healthy and growing. The investors, which include Hong Kong-based Oasis Management, PAG and Enhanced Investment Products Ltd., said the borrower’s action could set a dangerous precedent for the broader market.