Banks have seized $2 billion in cash from Evergrande, the struggling Chinese real estate developer reported Tuesday, as it postponed the release of its annual profits.
Evergrande has stated that it will be unable to meet the March 31 deadline for submitting audited results for 2021, a year in which it defaulted on its loans due to a drop in pricing and activity in China’s massive real estate sector.
Evergrande Property Services, one of its subsidiaries, reported that some of its lenders had suddenly demanded roughly 13.4 billion yuan ($2.1 billion) in bank deposits provided as collateral for “third party guarantees.” It didn’t reveal who the lenders were, just that the banks had taken custody of the funds. The property services unit stated that an impartial committee will be formed to conduct an investigation.
The real estate developer is one of China’s largest and most indebted, with more than $300 billion in total debts, including around $19 billion in outstanding offshore bonds held on behalf of its customers by foreign asset managers and private banks. Fitch Ratings put Evergrande in default in December, citing the company’s failure to pay interest on two dollar-denominated debts as the reason for the downgrade.
Beijing began cracking down on excess borrowing by developers in 2020 in an effort to rein in their high leverage and restrict runaway property prices. However, the sector’s difficulties worsened substantially last fall, when Evergrande began aggressively alerting markets of liquidity issues.
There is no indication that the Chinese government is taking the lead in steering Evergrande through a debt restructuring and reorganization of its massive commercial activities.