Evergrande's crisis continues: $2.7 billion seized, earnings delayed

Banks have seized US$2 billion ($2.7 billion) in cash from Evergrande, the ailing Chinese real estate developer says, announcing a delay to the publication of its annual earnings.

Evergrande on Tuesday said it wouldn't be able to meet the March 31 deadline for publishing audited results for 2021, a year which saw it default on its debts as prices and activity in China's vast real estate sector slumped.

One of its units — Evergrande Property Services — said some of its lenders had unexpectedly claimed around 13.4 billion yuan ($2.8 billion) of its bank deposits that were pledged as collateral for "third party guarantees".

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It didn't specify who the lenders were, saying only that the banks had taken control of the cash. The property services unit said it would establish an independent committee to investigate.

The real estate developer is one of China's largest and its most indebted with more than US$300 billion ($400 billion) of total liabilities, including about US$19 billion ($25.5 billion) in outstanding offshore bonds held by international asset managers and private banks on behalf of their clients.

Bankrupt over inability to pay bonds

Evergrande was declared by Fitch Ratings to be in default in December — a downgrade that the ratings agency said reflected the company's inability to pay interest due on two dollar-denominated bonds.

In 2020, Beijing started cracking down on excessive borrowing by developers in a bid to rein in their high leverage and curb runaway housing prices. But the sector's problems escalated significantly last fall when Evergrande began warning the markets urgently of liquidity problems.

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There's evidence now that the Chinese government is taking a leading role in guiding Evergrande through a restructuring of its debt and sprawling business operations.

But some of the company's international creditors have been losing patience.

A group of overseas bondholders threatened in January to take legal action over the "opaque" debt restructuring process.

They said they would "seriously consider enforcement actions" after Evergrande failed to engage substantially with them about reorganising its operations.

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Another payment due today

Evergrande has another interest payment due on Wednesday.

The company said in its exchange filing that "audit work has not yet been completed," and "drastic changes" in the operational environment and the COVID-19 pandemic had led to delays in preparing its earnings.

It would publish them "as soon as practicable" after the audit has been completed, it said.

Developers cite COVID-19 problems

Other major developers are also having trouble meeting the March 31 deadline for earnings.

Sunac China and Shimao China, which ranked No. 3 and No. 12 in property sales last year, said Monday they would also have to delay publishing their annual results.

Both cited COVID-related restrictions, such as quarantines and travel restrictions, for holding up the audit process.

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Ronshine China, which was among the top 30 developers last year, also said it wouldn't be able to file audited results by March 31 as its original auditor had resigned, according to an exchange filing by the company on Monday.

Ronshine China said later that day it had hired a new auditor and would publish audited results "as soon as practicable".