Evergrande resolves debt dispute with Guangfa Bank after Hong Kong lenders withdrew mortgage loans to its apartment buyers

Guangfa won a court order freezing US$20 million of Evergrande’s assets in China this month
Dispute wiped US$2.7 billion off Evergrande’s market capitalisation on Monday

Banking & finance

Chad Bray

Published: 10:28am, 22 Jul 2021

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Heavily indebted developer China Evergrande said on Thursday that it resolved a dispute with a bank creditor that led to 132 million yuan (US$20 million) in its assets being frozen this month.

The Shenzhen-based company said it maintained a “cooperative relationship” with China Guangfa Bank and had resolved its dispute with the bank following additional communication.

“The two parties will continue to consolidate and deepen their business relationship in the future,” Evergrande said in a statement on its website.

Evergrande, the world’s most indebted developer, said on Monday that it was considering “legal proceedings” against Guangfa Bank after the lender obtained a court order in eastern China earlier this month freezing some of its assets.

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10-storey residential building in China constructed in a day

The developer’s shares crashed in Hong Kong on Monday, falling 16 per cent and wiping US$2.7 billion off its market capitalisation after the dispute became public and increased concerns about its financial health.

Shares of Evergrande jumped as much as 11 per cent in early trading in Hong Kong on Thursday following the announcement.

Several major banks in Hong Kong stopped offering mortgage loans for unfinished flats in its two projects in the city this week as a result, according to people familiar with the matter. The banks include Bank of China (Hong Kong), Bank of East Asia, HSBC, Industrial and Commercial Bank of China (Asia), Hang Seng Bank and Standard Chartered, the people said.

The projects under construction are the Emerald Bay phase two in Tuen Mun and The Vertex in Cheung Sha Wan. Phase one of Emerald Bay is already completed.

An agent highlights China Evergrande's Emerald Bay phase two in Tuen Mun, the first new residential project since the coronavirus pandemic. Photo: Xiaomei Chen

The 1,228-unit Emerald Bay phase two project is due to be completed in the third quarter of this year, while the 414-unit The Vertex will be completed in the fourth quarter.

Bank of East Asia said on Wednesday that the policy would not affect approved applications for mortgages at either property and it “continues to accept applications for these projects on a first legal charge basis”.

HSBC and ICBC (Asia) declined to comment on Wednesday, whilst the other banks did not immediately have a comment or did not respond to requests for comment.

Evergrande said on Wednesday that it was moving forward with its Hong Kong projects on schedule and some banks remained “positive” on accepting mortgages for presale homes. The developer said it believed the effect of the mortgage change would be “minor”.

It also said it would review affected buyers in Hong Kong on a case-by-case basis and extend the transaction period for up to 60 days.

So far, 229 units at The Vertex and 1,196 at Emerald Bay have been sold, according to mReferral Mortgage Brokerage Services.

At the same time, the housing authority of Shaoyang in southern Hunan province said it allowed Evergrande to resume presales of homes at two of its projects in the city after halting them on Monday.

The authority said that the developer actively rectified the situation after it was accused this week of breaching some regulations pertaining to off-book sales collection, according to a statement posted on the authority’s website.

Additional reporting by Pearl Liu and Sandy Li

This article appeared in the South China Morning Post print edition as: Evergrande settles with bank over frozen assets

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