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Evergrande Real Estate Group Co., Ltd. update

Evergrande will face a record number of legal challenges in Chinese courts this year, as disputes with contractors have put pressure on under-stressed developers to try to reduce their debts of more than 100 billion U.S. dollars.

Data from the data provider Tianyancha shows that Evergrande is involved in 427 legal cases this year, compared with 436 in 2020. In the past week, there were 18 cases, which exceeded the total number of developers in 2014.

Legal cases involving developers have increased significantly in the past few years and have become the focus of attention in recent weeks because Increased fear Evergrande’s financial situation.

Xu Jiayan, the chairman of the group, was once the richest man in China, and its share price has plummeted 64% this year. Tighten restrictions Regarding the leverage of the real estate market. The trading price of its USD bonds maturing in 2022 is 56 cents per USD, higher than the lowest point of 53 cents earlier this month.

One of the companies that raised the legal challenge was China Huaibei Mining Group, which said at the end of July that it was filing a lawsuit against Evergrande in Anhui Province, alleging that the developer owed one of its subsidiaries 401 million yuan ($61.9 million). Huaibei has asked the court to terminate certain construction contracts.

The advertising company Leo Group said this month that it is applying to the Shenzhen court to freeze Evergrande’s assets. Leo Group claimed that the developer owed one of its subsidiaries for advertising fees of RMB 132 million.In addition, the Jiangsu Provincial Court in July freeze Due to the dispute over the prepayment terms of the loan, 132 million yuan should be deposited at the request of China Guangfa Bank.

The number of legal cases involving Evergrande dwarfs other large developers. According to the data from Tianyan, the industry peer Country Garden involved 39 cases in 2022.

Many of Evergrande’s legal cases are related to contractor disputes. The developer relies on the commercial paper issued to the partner company before the final cash payment.

S&P Global Ratings downgraded Evergrande’s rating to 3C this month, further entering the speculative field because it noticed the recent increase in contractor disputes. Rating agencies estimate that the company will have RMB 240 billion of commercial paper and accounts payable due in the next 12 months, of which RMB 100 billion will be due this year.

“Based on market information, Evergrande may be persuading its suppliers and contractors to accept physical assets… as payment for services and goods,” Standard & Poor’s said. It added that this is a “possible way” to retain cash to repay the loan, but it will still reflect a “deterioration” in its liquidity situation.

LETs, a construction group headquartered in the southern Chinese city of Xiamen, said last month that it stopped accepting Evergrande’s commercial bills on June 9. As of the announcement, LETs stated that it held overdue and unpaid Evergrande notes of RMB 33 million.

According to the Chinese media Caixin, civil lawsuits against Evergrande will be heard in the Guangzhou Intermediate People’s Court where Evergrande is headquartered. An expert working in the restructuring industry in China said that this approach is becoming “more and more common” and can give companies time to solve problems.

As of March, Evergrande’s debt was 674 billion yuan, and it promised to reduce this figure by 350 billion yuan by June 2023.The company has sought Asset sale To raise cash.

Xu Yu resigned as chairman of Evergrande’s mainland subsidiary Evergrande on Tuesday, but he still serves as chairman of the entire group.

Evergrande did not respond to a request for comment.

Additional reporting by Wang Xueqiao in Shanghai and Sherry Fei Ju and Sun Yu in Beijing

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