China Evergrande Group has delayed the publication of its annual results, with the world's most indebted property developer making the surprise disclosure that lenders have claimed more than US$2bn in cash from a subsidiary.
Evergrande, which has debts of over US$300bn and has been kept afloat by a state-run rescue operation since defaulting on US$22.7bn of offshore debts last year, blamed “drastic changes to the operational environment” and COVID-19 disruption for the postponement of the results and said audit work would not be completed by a 31 March deadline.
Separately, the company said that undisclosed lenders have claimed 13.4bn yuan (US$2.1bn) of deposits from its Evergrande Property Services subsidiary “as security for third party pledge guarantees”.
The surprise development may spark a legal battle and increases concerns that foreign investors will not recover their money.
A group of bondholders in the US and UK including Saba Capital, Redwood Capital Management and Ashmore Group (LSE:ASHM) PLC met on Tuesday and directed lawyers to start legal analysis, moving closer to taking action following the disclosure, the Financial Times reported, citing people familiar with the talks.
Evergrande has not provided the identity of who claimed the cash, but said that the “major incident” will be investigated independently.
The property developer set up a risk committee in December, with a provincial government taking charge of the restructuring. A member of the committee told investors on Tuesday that the company would strive to release a preliminary restructuring proposal by the end of July.
Meanwhile, the industry's crisis continues, initially triggered as Beijing cracked down on excessive borrowing by developers to curtail excessive leverage and soaring house prices. Sunac China Holdings and Shimao Group Holdings said this week that publication of their results will also be delayed, with the property companies citing disruption caused by COVID-19.