Caixin
Jul 30, 2021 09:11 PM
BUSINESS & TECH

Evergrande Gets More Assets Frozen as Creditors Sue Over Missed Payments

Since the end of 2020, Evergrande has refused to repay commercial paper in several instances, and the overdue payments have stacked up in the second quarter, Caixin has learned. Photo: VCG
Since the end of 2020, Evergrande has refused to repay commercial paper in several instances, and the overdue payments have stacked up in the second quarter, Caixin has learned. Photo: VCG

Debt-plagued China Evergrande Group has had more assets frozen in the wake of a series of lawsuits filed by creditors over the property giant’s missed loan payments and other financial disputes.

The entire 20% share in Langfang Development Co. Ltd. (600149.SH) held by Evergrande’s main onshore unit will be frozen for three years by order of a local court in Central China’s Hubei province, according to a Thursday filing (link in Chinese) to the Shanghai Stock Exchange.

The order is the result of a civil lawsuit between Evergrande units and a state-backed builder over shanty-town homes and infrastructure in Xiaogan, a city in Central China, the filing said, without providing details.

The unit, Evergrande Real Estate Group Ltd., is the largest shareholder of Langfang Development and its shares were worth 365.7 million yuan ($56.6 million) based on the Friday closing price.

Huaibei Mining Holdings Co. Ltd. (600985.SH) on Thursday announced (link in Chinese) a subsidiary had also sued Evergrande Real Estate and two of its units for missing payments of as much as 400 million yuan in project bills and default penalties.

Markets were spooked last week by a loan dispute Evergrande had with Guangfa Bank Co. Ltd., which led to the freezing of a $20 million deposit held by its main onshore subsidiary, while Peace Tree Wood Ltd. has said Evergrande has missed payments on 2 million yuan ($309,000) of commercial bills.

The loan dispute with Guangfa, which was later resolved, pointed to “the fragility of the company’s funding situation,” S&P Global Ratings Inc. said earlier this week, lowering the credit rating.

Evergrande has been caught in a liquidity crunch as its access to new funding has been severely diminished after regulators moved to curb rising debt levels among property developers.  

Since the end of 2020, Evergrande has refused to repay commercial paper in several instances, and the overdue payments have stacked up in the second quarter, several creditors have told Caixin.

The company has launched mass sales promotions and slashed land purchases in an effort to bolster its balance sheet, but ratings agency S&P has warned that aggressive price cuts would lead to slimmer profit margins that would in turn damage its creditworthiness.

The company’s Hong Kong-listed shares have tumbled 46% in the last two weeks, having shaven almost two-thirds of its price since the start of the year amid mounting concerns about its ability to repay more than 600 billion yuan ($92.8 billion) in debt.

They closed at HK$5.26 on Friday, down almost 10%.

Contact reporter Guo Yingzhe (yingzheguo@caixin.com) and editor Flynn Murphy (flynnmurphy@caixin.com)

Bloomberg contributed to this report.

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