Indebted Chinese property developer Evergrande said on Tuesday that global accounting firm PwC had resigned its auditor, citing differing views on financial statements being held by the regulator. Hong Kong investigation.
The development casts further doubt on the fate of Evergrande, which has $300 billion in debt and has many times late deadline to roll out a restructuring plan after its default in late 2021, which was part of a broader real estate sector crisis in China.
The resignation letter was sent to the company’s board on Monday, Evergrande said in an exchange filing. international auditors resigned from defaulted Chinese developers, as a wave of unreleased financial results increased uncertainty about the full size of the debt.
the eternal has been meeting with creditors in Hong Kong since last week to update them on its progress. They include international investors who hold about $20 billion in debt and have been frustrated by the lack of concrete developments in the restructuring process.
The developer is offering 12-year installment repayments on the principal of the foreign debt and some adjustments to the offering of debt-to-equity swaps, which will give allows investors to convert foreign debt into shares in Evergrande’s Hong Kong-listed electric vehicle and wealth management unit. unit, said a lawyer familiar with the negotiations.
“There isn’t much room for adjustment to the final proposal,” the lawyer said, explaining that investors don’t expect the company to make any substantial concessions, such as faster repayment or raise more personal wealth from founders to pay.
Evergrande and PwC have been investigated since 2021 by the Accounting and Financial Reporting Council, Hong Kong’s audit regulator, into the property developer’s 2020 accounts. Last year, the scope of the investigation expanded to a $2 billion loan plan that led to a clear run.
PwC and AFRC declined to comment. Evergrande did not immediately respond to a request for comment.
“It’s not surprising to see auditors leaving problem companies,” said Zhan Kai, senior advisor at Chinese law firm Yuanda. “It shows that the accounting firm can no longer cooperate with the company. . . this often indicates problematic disclosure when companies default.”
According to the filing, disagreements between the accounting firm and Evergrande included Evergrande’s restructuring timetable and assessment of related disclosures.
Special, PwC Note that the developer did not provide enough details about the independent commission’s investigation into an undisclosed deposit pledge involving the company’s EV unit Evergrande New Energy Vehicles.
The company also failed to provide enough information about the $2 billion loan scheme under investigation, PwC said in its resignation letter, adding that Evergrande had been unable to make payments on a number of loans and loans. other interest-bearing debt due on the agreed date.
Evergrande said it will appoint Prism Hong Kong and Shanghai, a Hong Kong-based company, as its new auditor until the end of its next annual meeting in June.
Beijing has eased regulations on the real estate sector, a key driver of China’s economic growth. Developers have continued to issue new high-yield bonds, of which Dalian Wanda Commercial Management raised $400 million worth of bonds with an 11% bond yield in Hong Kong last week for delivery. First outbreak of its kind since November 2021.
However, some developers are still struggling to recover from the crisis. Last week, Oasis Management, a Hong Kong investment company, filed a $100 million lawsuit against Kaisasecond most indebted developer internationally after Evergrande, in New York.
“When we see that China is supporting the domestic real estate sector, almost all of the support is there,” said Brock Silvers, chief investment officer at private equity firm Kaiyuan Capital in Hong Kong. It’s all about home delivery. “All the support that people get pumped in, none of it has to do with dollar bonds.”