Chinese creditors have sued China Evergrande for more than $13 billion, alleging overdue payments, as domestic companies owe money due to a race between developers and overseas bondholders to guarantee repayment.
A Chinese court assigned to handle civil cases against Evergrande has heard 367 lawsuits totaling Rmb 84 billion ($13.2 billion), according to official filings obtained by the Financial Times. Times review. Requests were submitted between August 24 and December 9, when the group was declared to be in the “”limited default“By Fitch Ratings.
The timing of the claims demonstrates that domestic creditors have lost confidence in the ability of Evergrande, the world’s most leveraged developer, to make good payments, analysts said. debts before declaring default.
Bo Zhuang, an analyst at Loomis Sayles, an asset manager in Singapore, said: “Lenders are racing to take Evergrande to court so they can be more profitable in getting their money back in the event of a reinstatement. debt structure”. “This is especially true when not all loans are treated equally.”
The wave of creditor debt collection began when the central bank be censured Evergrande management in August over its debt crisis, which collapsed the group’s sales and further limited the group’s access to finance. In the days that followed, Evergrande alert that it is in danger of default.
According to CRIC, a Shanghai-based consulting firm, Evergrande reported sales of Rs 15.3 billion in the three months to November 30, compared with Rs 228 billion in the same period last year.
Evergrande’s enlightenment has The global market is shaken and raised concerns about spillovers in the real estate sector, an important driver of growth in the world’s second-largest economy.
In August 2020, Beijing issued strict leverage limit The so-called “three red lines” led to tighter liquidity in the country’s real estate sector.
Officials have warned state-owned banks against helping redundant developers like Evergrande, but directed them to give credit to less indebted property groups in a bid to ease pressure on the sector. real estate sector. This industry is estimated to account for about one third of the total economic output of the country.
“There is no way we can repay so many creditors with our limited resources,” said an Evergrande executive, who requested anonymity. “We’ll let the judges decide who gets paid and how much.”
Evergrande has also issued bonds abroad totaling $19 billion. International creditors will compete with domestic creditors to secure repayment from the cash-strapped group.
State banks are Evergrande’s most active creditors. More than 40 lenders, from China’s “big four” like Agricultural Bank of China to small sector lenders, is pursuing delinquent loans totaling RM22 billion, according to court filings.
A government policy adviser said banks’ exposure to risk was worse than indicated because many were reluctant to disclose potential losses from Evergrande by taking them to court. The collapse of Evergrande will have a larger-than-expected impact on China’s financial system, the adviser said.
State-owned construction groups are pursuing Evergrande for Rs 16.4 billion, further complicating the government’s effort to secure the group. Current projects completed. Many projects have been financed with upfront payments from homebuyers.
“We cannot continue construction when our workers have not been paid for months,” said an executive at Hefei Construction and Engineering Group in central Anhui province, the company is working on. sued Evergrande for Rmb 229 million for late payment said.
Shadow lenders, including trusts and manufacturers that lent Evergrande money at high interest rates, are also struggling to recover their loans.
According to court filings, 19 of the cases were “underground lending disputes” involving non-traditional creditors including hotels, metals traders and pharmaceutical companies.
A person familiar with Evergrande’s loan from shadow banking said the developer and its subsidiaries started turning to private loans – some with annual interest rates as high as 73% – from cash-rich local businesses in April. “Evergrande has run out of other options,” the person said.
As lawsuits increase, creditors must face Uncertain recovery prospects. The central government has established rules for corporate restructuring but political factors, such as local government intervention, influence the process.
“The local government’s top priority is to ensure that all Evergrande projects [in their city] completed and local creditors paid,” said a person familiar with Evergrande’s loans from shadow lenders. “They don’t mind doing so at the expense of other creditors.”
Additional reporting by Xinning Liu in Beijing, Tom Mitchell in Singapore and Andy Lin in Hong Kong