Evergrande crisis deepens as lender seizes headquarters

Evergrande’s Hong Kong headquarters has been seized by a lender after the struggling Chinese property developer defaulted on a loan and twice failed to sell the building, according to four people with knowledge of the matter.

The lender, whose identity has not yet been confirmed, informed Evergrande earlier this week that it had appointed a receiver to take charge of the property that is valued at $1.2bn and force a sale, the people said.

They added that the lender had security over the China Evergrande Centre — a 26-storey tower near the city centre of Hong Kong island — which allowed it to take charge of the asset.

One person familiar with the situation said that Evergrande had in the past pledged the building in exchange for loans from a consortium of lenders led by China Citic Bank International, the Hong Kong subsidiary of the Chinese state-owned bank.

The lender has appointed receivers from restructuring firm Alvarez & Marsal, according to two people.

Evergrande and Citic Bank International did not immediately reply to requests for comment. Alvarez & Marsal declined to comment.

Last September, as an Evergrande default loomed, Citic Bank told its investors that its loans to the developer were pledged against valuable security, although it did not provide further details.

Evergrande was the most prominent developer to default last year as a liquidity crisis gripped the Chinese property sector. It told creditors in January that it would unveil a preliminary plan by the end of July to restructure its $300bn of liabilities, which include $20bn of offshore bonds, but it missed that deadline and instead said it had only made “positive progress” towards a proposal.

Evergrande has twice attempted to sell the tower. Last October, Chinese state-owned Yuexiu Property pulled out of a reported $1.7bn deal to buy the building over concerns about the developer’s financial situation.

It put the headquarters back on the market in July, attracting a number of bids including from Li Ka-shing’s Hong Kong property developer CK Asset Holdings.

However, a person close to the tender process said the sale had again fallen through because the bids were too low, reflecting Evergrande’s desperate need to raise cash.

Evergrande has been divesting assets including property and its stakes in companies in a bid to repay some of its creditors. Its chair has also put his personal assets up for sale, including private jets. This week, Evergrande said it would sell its remaining stakes in China’s Shengjing Bank for $1.1bn.

The developer, which is listed in Hong Kong but whose shares have been suspended from trading since March, has not yet informed the market that a receiver has been appointed over one of its large Hong Kong assets.

Earlier this year, Oaktree Capital, a $158bn American asset manager, seized two of Evergrande’s prized assets after it defaulted on loans that totalled around $1bn. The assets were a large development site in Hong Kong, where Evergrande’s chair Hui Ka Yan had intended to build a Versailles-like mansion and a sprawling residential and tourism resort near Shanghai called “Venice”.

Evergrande is also fighting a winding-up petition filed in the Hong Kong courts by one of its creditors, Top Shine Global, because the developer allegedly did not honour a financial obligation of HK$863mn ($109mn). The court hearing has been adjourned until November 7.