[Epoch Times March 24, 2022](The Epoch Times reporter Zhang Yujie comprehensive report) The crisis of China Evergrande Group, which is heavily indebted, continues to ferment. On March 22, its subsidiary Evergrande Property announced that its US$2.1 billion deposit was enforced by relevant banks. Subsequently, China Evergrande’s bondholders said they were considering further legal action against Evergrande.
The British “Financial Times” quoted people familiar with the matter on March 23 and revealed that some American and British investors held a meeting on Tuesday (March 22) to ask lawyers to analyze whether to formally take legal action against Evergrande Group from a legal perspective. .
Evergrande Property announced on March 22 that the company’s 13.4 billion yuan (about 2.1 billion U.S. dollars) deposits had been enforced by relevant banks, and these deposits were pledged deposits for third parties.
“We don’t have enough information to say absolutely that the $2.1 billion in security is gone, it’s probably just frozen because creditors are trying to figure out the company’s guarantee,” Hong Kong-based analyst Travis Lundy told The Wall Street Journal. debt position, or the money may be entirely owned by the bank.”
Investors at the meeting on the 22nd included companies such as Saba Capital, Redwood Capital Management and Ashmore.
Investors felt they had no choice but to take legal action and plans were in place, one participant said. He said: “When it comes to the matter of Evergrande’s US$2.1 billion, the participants were emotional.”
Many of Evergrande’s investors belong to a group that advises the US law firm Kirkland & Ellis and Moelis & Company. The group, which hired law firm Harneys in January, said it had “no choice but to seriously consider legal action against Evergrande”.
Overseas investors ask for details
The Financial Times reported that bondholders had hoped that the Hong Kong-listed Evergrande subsidiary (Evergrande Property) would repay the debt. They said it was unfair (to investors) that those (enforced) deposits were meant to be used to repay bonds.
Bondholders demanded to know what steps Evergrande was taking to get the deposit back and whether Evergrande’s board of directors approved the deposit for use as a security deposit.
Evergrande Group has not disclosed the identity of the enforcer of the deposit, and said on the 22nd that it has established an independent investigation committee.
Evergrande Group failed to pay its debts in September last year until it officially confirmed the default in December of the same year. Evergrande’s information disclosure is insufficient, and international investors usually do not know relevant information.
Evergrande Group calls with investors
Evergrande Group held a call with investors on the evening of March 22.
CNN reported on the 23rd that Evergrande said in the conference call that it will provide creditors with a debt restructuring plan by the end of July this year and will strengthen communication with creditors.
Evergrande executive director Siu Shawn said Evergrande currently has $22.7 billion in overseas debt, including bonds, project loans and personal financing, and the group has contacted 89 foreign creditors.
People familiar with the matter told the Financial Times that few details were disclosed about the call, which was like a politician addressing 15,000 people.
Evergrande Group is in deep financial trouble
China Evergrande Group is China’s largest and most indebted real estate developer, with more than $300 billion in debt.
On the day Evergrande Property announced that the US$2.1 billion deposit was enforced by the bank, the three listed companies of China Evergrande, Evergrande Property and Evergrande Automobile all issued announcements, announcing that they could not disclose their 2021 performance reports before the March 31 deadline.
On Monday (March 21), China Evergrande, Evergrande Property and Evergrande Auto suspended stock trading on the Hong Kong Stock Exchange.
In December, Fitch Ratings, an international rating agency, downgraded Evergrande Group’s credit rating from C to restricted default.
Evergrande originally planned to sell a 50% stake in Evergrande Property, worth about $2.6 billion, but the deal fell through in October last year.
Bloomberg reported that China Evergrande may continue to sell assets under the pressure of debt. Recently, it was reported that Evergrande plans to transfer a 30% stake in Nanjing Hengze Real Estate Development Company to AVIC Trust Company.
Evergrande crisis is the epitome of China’s real estate industry
Evergrande Group’s financial woes are also playing out at other Chinese real estate companies. Liquidity in China’s real estate sector has slumped, and developers are selling assets around the world.
For example, Chinese real estate giant R&F has signed a sale and purchase agreement on March 14 to sell its British real estate project Vauxhall Square for about £95.7 million, with an estimated loss of about £68.845 million at the time of the sale.
The Fed warned that given the scale of China’s trade with the rest of the world, the gradual collapse of Evergrande Group and the woes of China’s real estate industry will also have an impact on other countries, including the US economy and real estate market.
In this environment, continued supervision of leveraged institutions could put pressure on some highly indebted companies, especially real estate companies such as China Evergrande, the Federal Reserve said in its financial stability report last November.
Before Evergrande and its subsidiaries announced the postponement of their 2021 results, two other large real estate companies, Sunac China and Shimao China, said on the 21st that they would also delay the release of their annual results.
Responsible editor: Ye Ziwei#