SHANGHAI (Reuters) – China’s most indebted property developer, Evergrande Group, said on Monday that it was arranging payment for some of its project companies’ commercial paper that had not been repaid on time.
In a statement, Evergrande said the amounts involved were “very small”, but that it attached great importance to the matter and was arranging payment.
Evergrande’s debt problem has become a major investor concern since a leaked document in September showed the developer sought government help to avert a cash crunch.
The nation’s major developer has been scrambling for cash as it seeks to ease such concerns and meet Beijing’s new debt-ratio caps. Beijing is tackling what it considers excessive borrowing in the real estate development sector with planned new debt-ratio caps dubbed the “three red lines”.
A source with knowledge of the matter said the late payments involved a few of Evergrande’s project companies that were not operating well.
On an online complaint platform operated by Sina Corporation, where consumers can take up issues they have with any company operating in China, at least four paper holders posted since mid-May saying they had not received payments from different Evergrande units.
One post, showing images of six commercial papers, said four of Evergrande’s units in Kunming, the capital city of Yunnan province, have delayed a total of close to 4 million yuan ($624,921.88) payments for three months.
Commenting on the post, Evergrande told Reuters it had instructed its project companies to resolve the repayment on the day it found out about the problems, and the four Kunming units have already completed the payments on May 18.
Shares in Evergrande dropped over 5% to HK$10.82 – their lowest level since March last year – before closing up 3.2% on Monday. The stock has lost 21% so far this year.
Evergrande’s bonds have also tumbled. The mid price on the company’s $1.34 billion June 2023 bond was last quoted at 80.625 cents, according to Refinitiv, down from a recent peak of 91.75 on May 26.
In the statement on Monday, the developer said the operation of the group is normal, and it has never had any late repayment or defaults in the last 25 years since its establishment.
It also said its financial business with Shengjing Bank, in which it has a 36% stake, complies with legal requirements.
A media platform under Caixin reported in late May that China’s banking and insurance watchdog was probing connected transactions worth over 100 billion yuan between Evergrande and Shengjing.
Evergrande has vowed to cut its debt levels to meet regulatory requirements. Last week, it said its debt was on track to drop to below 600 billion yuan by the end of this month.
($1 = 6.4008 Chinese yuan)
(Reporting by Andrew Galbraith in Shanghai, Clare Jim in Hong Kong and the Beijing Newsroom; Editing by Himani Sarkar, Ana Nicolaci da Costa and Louise Heavens)