Trading in China's Evergrande has been suspended indefinitely as over-leveraged real estate developer continues its collapse
By jdheyes // 2022-03-24
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China's failing mega-real estate developer Evergrande is continuing its slow-motion collapse, as the company will now miss a deadline to publish its financial details for last year by the end of this month, reports noted on Wednesday. Evergrande executives had been told to publish those details by March 31, per stock listing rules, but audit work has not yet been completed so the company will miss its month-end deadline. "Its two Hong Kong-listed units, China Evergrande New Energy Vehicle Group and Evergrande Property Services Group, said the publication of their financial results will also be delayed," the Australian Associated Press reported. "Evergrande said in a stock exchange filing that due to 'drastic changes' in its operations since the second half of last year, the auditor has added a large number of additional audit procedures." As such, the embattled developer now plans to publish the audited 2021 financial data "as soon as practicable" following the completion of the audit procedures. Thus, as required by stock rules, a previous trading suspension of Evergrande shares will now be kept in place until the results are finally presented to the public. Trading in all three of the companies under the Evergrande umbrella was suspended on Monday. Also, Chinese and foreign investment banks are grabbing their share of what capital remains within the company as fast as it becomes available. According to the AAP, in a separate filing, Evergrande Property Services noted that some 13.4 billion yuan (roughly $2.1 billion) of bank deposits that have been earmarked as security for third-party loan guarantees had already been claimed by relevant financial institutions. But according to Bloomberg News, the seizure of the security deposits left investors in Evergrande "baffled" because they apparently had no idea the company had put up the funds: Investors in China Evergrande Group are still in the dark over just how $2.1 billion of deposits at its property-services unit came to be used as security for pledge guarantees and seized by banks. In a call with investors late Tuesday, the developer’s officials reiterated comments from earlier filings that they were investigating the matter without sharing fresh details, according to people who attended and asked not to be identified. The third-party pledge guarantee wipes out most of Evergrande Property Services Group Ltd.’s cash holdings. “It’s peculiar because investors expect Evergrande management should be aware of where the cash went rather than setting up an investigation committee to find out,” said noted Bloomberg Intelligence analyst Andrew Chan. Though the amount of cash that was seized by the banks is relatively small in regards to the company's broader restructuring, it does raise new questions about the reliability of services unit's financial accounts "if the group plans to sell it at a good price to achieve maximum recovery for creditors," Chan noted further. What seems to be happening is that Evergrande execs have set up a shell game of sorts with the company's liquid assets, probably to avoid a complete collapse, which would risk the wrath of the ChiCom government. "Evergrande creditors are keeping a close eye on the beleaguered developer as it embarks on a debt restructuring that’s likely to be among China’s largest and most complex," Bloomberg News noted further. "Worries over transparency have surfaced repeatedly as Chinese developers struggle to cope with a credit crunch that’s swept the sector as Beijing clamps down on excessive borrowing." As for CNBC, the financial news network sees the company's inability, along with other Chinese real estate developers, to meet its deadline for publishing 2021 financial data as more "red flags." “When developers change auditors ahead of their full-year results season, it typically raises red flags regarding potential auditing issues and should lead to serious market concerns about the trustworthiness of their financial numbers," Japanese bank Nomura said in a note on Monday. Sources include: CNBC.com Bloomberg.com Yahoo.com
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