Evergrande crisis escalates after lender seizes head office

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Evergrande’s Hong Kong headquarters was seized by a lender after the struggling Chinese property developer defaulted on a loan and twice failed to sell the building, according to four people with knowledge of the matter.

The lender, whose identity has yet to be confirmed, informed Evergrande earlier this week that it had appointed a receiver to take over the $1.2 billion-valued property and force a sale, it said. the sources.

They added that the lender had a guarantee on the China Evergrande Center – a 26-story tower near downtown Hong Kong Island – which enabled it to take over the asset.

A person familiar with the situation said Evergrande had in the past pledged the building in exchange for loans from a consortium of lenders led by China Citic Bank International, the Hong Kong branch of the Chinese state-owned bank.

The lender has appointed receivers from restructuring firm Alvarez & Marsal, according to two people.

Evergrande and Citic Bank International did not immediately respond to requests for comment. Alvarez & Marsal declined to comment.

Last September, as an Evergrande default loomed, Citic Bank told its investors that its loans to the developer were secured against valuable collateral, although it did not provide further details.

Evergrande was the highest-profile developer to default last year as a liquidity crunch gripped China’s property sector. He told creditors in January he would unveil a preliminary plan by the end of July to restructure his $300 billion in liabilities, including $20 billion in offshore bonds, but he missed that deadline and instead said that he had only made “positive progress” towards a proposal.

Evergrande twice tried to sell the tower. Last October, China’s state-owned Yuexiu Property pulled out of a $1.7 billion deal to buy the building due to concerns about the developer’s financial condition.

He put the headquarters back on the market in July, attracting a number of offers, including from Li Ka-shing’s Hong Kong property developer CK Asset Holdings.

However, a person familiar with the bidding process said the sale fell through again because bids were too low, reflecting Evergrande’s desperate need to raise cash.

Evergrande disposed of assets, including real estate and its stakes in companies, in an effort to repay some of its creditors. Its president has also put his personal possessions up for sale, including private jets. This week, Evergrande announced that it would sell its remaining stakes in Chinese bank Shengjing for $1.1 billion.

The promoter, which is listed in Hong Kong but whose shares have been suspended since March, has not yet informed the market that a receiver has been appointed over one of its large Hong Kong assets.

Earlier this year, Oaktree Capital, a $158 billion U.S. asset manager, seized two of Evergrande’s most valuable assets after it defaulted on loans totaling around $1 billion. The assets were a large development site in Hong Kong, where Evergrande Chairman Hui Ka Yan intended to build a Versailles-like mansion and a sprawling residential and tourist complex near Shanghai called “Venice”.

Evergrande is also fighting a liquidation petition filed in Hong Kong courts by one of its creditors, Top Shine Global, because the developer allegedly failed to honor a financial obligation of HK$863 million ($109 million). . The hearing was adjourned to November 7.

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