China’s Evergrande stunned (and worried) after lenders demanded $ 2 billion in cash

Chinese developer Evergrande said Tuesday that it is investigating how lenders have claimed deposits valued at more than 13.4 billion yuan ($ 2.1 billion) for their subsidiary, the latest black mark against the debt-ridden real estate giant.

Beijing’s efforts to curb excessive debt in the real estate sector have hampered Evergrande, one of the country’s biggest developers, which is struggling to raise $ 300 billion in liabilities.

It announced Tuesday that one of its key units Evergrande Property Services Group had about $ 2.1 billion in cash that banks had claimed as security guarantees through a third party, a discovery made when the company made its annual report.

“In reviewing its financial report for the year ended 31 December 2021, (the subsidiary) found that deposits of approximately RMB13.4 billion as collateral for third-party guarantees were maintained by the banks concerned,” the company said. in an announcement on the Hong Kong Stock Exchange.

“(Evergrande) considers this to be a major incident and has set up an independent commission of inquiry to assess the implication of the incident.”

Another commission for the subsidiary of property will “examine the pledge guarantees” to its lenders.

The statement does not provide details on which banks had kept their promises.

This revelation adds to Evergrande’s financial hardship, which international rating agencies had set as a default in December after failing to repay commitments on time.

The company also said on Tuesday that it would not be able to publish its 2021 audited results at the end of March – as required by the rules of Hong Kong’s list – blaming the delay on Covid-19.

Read more: China Evergrande shares halted, set to release ‘information’

“Due to the drastic changes in the operating environment of the company since the second half of last year … together with the effect caused by the Covid-19 epidemic … the company will not be able to complete the control procedures on time , ”it said in a separate announcement.

It added that the suspension in its stock trading – which was stopped on Monday – remains in force until further notice.

It urged investors to be cautious “in view of the operational and financial challenges facing the group and in particular the debt pressure they are facing”.

Monday’s suspension is the second this year.

The company has said several times that it will complete its projects and deliver them to buyers in a desperate bid to save its debts, and had asked its creditors to give it time.

Earlier struggles to pay suppliers and contractors because of the crisis led to protests by homebuyers and investors at the group’s headquarters in Shenzhen in September.

Also read: Property stock sinks, Oaktree occupies assets: Evergrande update

Evergrande’s misery has had knock-on effects throughout China’s real estate sector, with some smaller companies also falling loans and others struggling to find enough money.

The International Monetary Fund warned in late January that the crisis over property financing could have spillover effects on the broader economy and world markets.