Evergrande Told to Cough Up $1.1 Billion for Previously Undisclosed Guarantees

Embattled property developer China Evergrande Group said one of its units has been told to honor a $1.1 billion guarantee, revealing yet another large financial obligation that wasn’t previously disclosed, the Wall Street Journal reported. Evergrande, in a regulatory filing on Sunday, said one of its subsidiaries in China had provided counter guarantees to an unnamed entity by pledging its shares in Shengjing Bank Co., a regional lender based in the city of Shenyang, the capital of northeastern Liaoning province. The pledged shares represent Evergrande’s entire 14.6% stake in the Chinese bank, which is listed in Hong Kong. They were part of a convoluted financial arrangement where the unnamed entity provided guarantees in July 2021 for borrowers that were ultimately controlled by Evergrande. Those borrowers defaulted on their loans, causing the unnamed entity to come up with 7.3 billion yuan, equivalent to $1.1 billion. It then filed for arbitration against the Evergrande subsidiary that provided the counter guarantees. Evergrande said it received an arbitration ruling on July 25 that said the entity “has the priority to receive compensation from the sale of the shares” in Shengjing Bank. The world’s most indebted property developer defaulted on its U.S. dollar bonds in late 2021, and has been taking heat from its international creditors. Bondholders have expressed frustration over how large sums of money have been leaving Evergrande to pay previously undisclosed obligations, potentially hurting investors’ recovery prospects. Read more. (Subscription required.)