On Aug. 16, China’s Evergrande Group suffered a blow after one of its units, Hengda Real Estate Group, became the target of a government probe. This came months after the group reportedly missed a deadline for releasing its annual results, prompting the rebuke of two major stock exchanges, SCMP reported.
According to the developer, in a filing to the Shanghai Stock Exchange on Aug. 16, the China Securities Regulatory Commission (CSRC) sent it a letter about the probe.
“The company is actively assisting the regulator in conducting the probe,” Hengda said in the filing.
The indirectly owned unit of Evergrande Group, Hengda has been reprimanded by the Shanghai and Shenzhen stock exchanges for breaching listing rules that required the company to publish its 2021 annual report by Apr. 30 last year. It stated that it would “accept any disciplinary action” placed upon it, but nothing has been done so far.
Hengda’s parent company, Evergrande Group, is already troubled with a 2.44 trillion Chinese yuan (US$335.3 billion) worth of total liabilities, making it the world’s most indebted developer. According to Zhou Ling, fund manager with Shanghai Shiva Investment, Evergrnade’s 2021 default set up “a chain of bad reactions,” landing the real estate giant “in hot water.”
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According to exchange filings, on July 17, the company reported that it released a net loss attributable to shareholders of 476 billion Chinese yuan for 2021, and 105.9 billion Chinese yuan for 2022.
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Evergrande in trouble
Evergrande Group has become a primary target for the Chinese Communist Party’s (CCP) crackdown on the red hot property market following the “three red lines” policy. Since then, the developer has been struggling to get projects done and repay suppliers and creditors.
In February, the company said its directors fell “below standards” after being involved in diverting loans gained by its unit, Evergrande Property Services, Reuters reported.
Evergrande Group originally planned to hold a voting session on its restructuring proposal for $20 billion worth of offshore debt on Aug. 23 and 24, following approval from a Hong Kong court on July 24.
However, it was forced to postpone the voting by a month to provide more time “to maximize creditor engagement and support informed-decision making.” Though the meetings are scheduled to take place on Sept. 26, three people with knowledge of the matter said many creditors already registered their vote in August.
This decision came as the group lost $2.2 billion in value following trading of their stock resuming, Reuters wrote.
According to the state-owned Economic Information Daily newspaper, 73 mainland-listed firms were probed by the CSRC as of July 18, with 54 of them suspected of breaching information sharing regulations. Other giants like China Shipbuilding Industry and Beijing Capital Development were also on the hit list for the same offenses.