Evergrande’s crisis continues: $ 2 billion seized by banks, earnings delayed

Evergrande said it would not be able to meet the March 31 deadline to publish revised results for 2021, a year in which it saw it default its debt as prices and activity in China’s huge real estate sector fell.

One of its entities – Evergrande Property Services – said some of its lenders had unexpectedly demanded about 13.4 billion yuan ($ 2.1 billion) of their bank deposits pledged as “third-party guarantees.”

It did not specify who the lenders were, saying only that the banks had taken control of the cash. The real estate service unit said it would set up an independent committee to investigate the matter.

In a call with global investors on Wednesday, the company said it will present a proposal for debt restructuring to creditors by the end of July.

Evergrande will “strengthen communication” with creditors, Siu Shawn, the company’s CEO, said during the call.

Evergrande currently has $ 22.7 billion in offshore debt, including bonds, project loans and private financing, he said. The company has so far contacted 89 offshore creditors to exchange views with them, he added.

The real estate developer is one of China’s largest and its most indebted with more than $ 300 billion in total liabilities.

Evergrande was declared by Fitch Ratings to default in December – a downgrade that the rating agency said reflected the company’s inability to pay interest on two dollar-denominated bonds.

Evergrande can not pay its debts.  China is struggling to curb the fallout

In 2020, Beijing began cracking down on excessive borrowing from developers in an attempt to curb their high leverage effect and curb runaway housing prices. But the sector’s problems escalated markedly last fall as Evergrande began warning markets urgently about liquidity problems.

There is now evidence that the Chinese government is taking a leading role in guiding Evergrande through a restructuring of its debt and extensive business operations.

But some of the company’s international creditors are losing patience.

A group of overseas bondholders threatened in January to take legal action over the “opaque” debt restructuring process. They said they would “seriously consider enforcement action” after Evergrande failed to engage significantly with them to reorganize its operations.

Evergrande has another interest payment due on Wednesday.

The company said in its exchange statement that “the audit work has not yet been completed,” and “drastic changes” in the operating environment and the Covid-19 pandemic had led to delays in the preparation of its earnings. It will publish them “as soon as practicable” after the audit is completed, it said.

Another major Chinese property developer may have to sell property

Other major developers are also having trouble meeting the March 31 earnings deadline.

Sunac China and Shimao China, which were No. 3 and No. 12 in real estate sales last year, said Monday that they would also have to postpone the publication of their annual results. Both cited Covid-related restrictions, such as quarantines and travel restrictions, to delay the audit process.
Ronshine China, which was among the top 30 developers last year, also said it would not be able to submit revised results by March 31, when its original auditor had resigned, according to an exchange file from the company on Monday. Ronshine China said later that day that it had hired a new auditor and would publish audited results “as soon as practicable.”

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