A Hong Kong property that China Evergrande Group planned to build a residential project on has been sold by receivers, with the defaulted developer projecting a loss of about $770 million.
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The purchase price for the tract in the Yuen Long area, near the Chinese border with Shenzhen, was $636.9 million, according to a stock exchange filing Sunday. Proceeds from that sale will be used to repay financial obligations related to the planned project, the company said.
The troubled builder announced in January that the land was used as security for a financing transaction worth $520 million. The project was seized by Oaktree Capital Group Holdings LP after Evergrande defaulted on a loan against which Oaktree had security, according to a Financial Times report at the time.
“Evergrande’s creditors are becoming impatient with the slow pace of the company’s debt workout and are pressing for repayment,” said Andrew Collier, a managing director at Orient Capital Research Inc.
{{/usCountry}}“Evergrande’s creditors are becoming impatient with the slow pace of the company’s debt workout and are pressing for repayment,” said Andrew Collier, a managing director at Orient Capital Research Inc.
{{/usCountry}}The developer is at the center of a credit crisis that has rippled through China’s real estate sector and slowed the world’s second-largest economy. Evergrande failed to deliver a preliminary restructuring plan for its offshore debt that was expected by the end of July, and has since said it would try to provide a specific proposal before the end of the year.
The builder’s creditors have become increasingly active the past several months. Evergrande’s Hong Kong headquarters building was taken over by a receiver while the luxury home in the city of Chairman Hui Ka Yan was reportedly seized by a bank. Meanwhile, a bondholder filed a winding-up petition against Evergrande in June, a case which risks the liquidation of company assets if the developer loses.
The sale of the land in Yuen Long “at a big loss may also indicate that Evergrande and its debtholders are not expecting a turnaround in China’s ailing property market,” said Collier. He expects further asset sales at a loss by Evergrande and its peers.
The company in September said construction was occurring at nearly all of its projects, and that it planned to resume activity at the remainder by the end of that month. Evergrande hasn’t issued an update since. A national mortgage-payment boycott emerged this year as buyers of unfinished or unbuilt residences protested delays in completing homes.