HONG KONG (Reuters) – China’s Huaibei Mining Holdings said its construction unit is suing Evergrande Group, the country’s most indebted property developer, over an overdue 400 million yuan ($62 million) payment.
Huaibei Mining said in a filing on Wednesday that Evergrande’s project company in the eastern province of Anhui repeatedly refused to pay the construction fee it owed Huaibei’s unit, including commercial paper Evergrande issued to the unit, citing a lack of money, despite six requests for repayment.
On Friday, Evergrande said in a stock exchange filing that parties are disputing over whether payment under the contract is due. It said its flagship unit, Evergrande Real Estate Group Co., has filed an objection to the court because it is not a party to the contract, so the litigation against it has no legal and contractual basis.
Huaibei’s construction unit signed a contract with Evergrande’s project company in November 2018 and has completed the construction work, according to the filing, according to the mining company’s filing, though it did not state the maturity date of the commercial paper.
Commercial paper, which is not counted as interest-bearing debt, is commonly used in the property sector as a payable that promises construction suppliers a payment on a future fixed date, usually within one year.
Worries over the developer’s debt and the potential systemic financial risk it posses have intensified after Evergrande admitted in June its project companies had not paid some commercial paper on time, but said it was arranging payment. Fitch downgraded its credit rating on Wednesday, signalling its concern of a potential default.[nL1N2P40Q8]
The developer is the biggest issuer of commercial paper in the country. Its flagship unit, Evergrande Real Estate Group, had 205.7 billion yuan ($32 billion) worth of commercial paper at the end of 2020, 24% higher than 2019 and 390% higher than 2015, filings showed.
($1 = 6.4733 Chinese yuan)
(Reporting by Clare Jim; Editing by Ana Nicolaci da Costa, Emelia Sithole-Matarise and Kim Coghill)