Evergrande Loses $1.1B Arbitration Case After Missing Restructuring Deadline

After failing to meet a promised deadline for announcing a restructuring plan, China Evergrande announced late on Sunday that a subsidiary of the mainland developer has lost a RMB 7.3 billion ($1.1 billion) arbitration case brought by a creditor.

Evergrande announced to the Hong Kong exchange that its Evergrande Group (Nanchang) Co, Ltd unit had received an arbitration ruling dated 25 July requiring it to pay the RMB 7.3 billion as compensation for loans of an equivalent amount which it had failed to repay to an unnamed creditor, which was the counterparty in the arbitration case.

The loan had been guaranteed by shares held by Evergrande in Hong Kong-listed Shengjing Bank, with the creditor now entitled to receive, on a priority basis, RMB 7.3 billion in proceeds from the sale of Evergrande’s stock in the mainland financial institution.

In September of last year, one week after missing its first offshore bond payment, Evergrande had announced that it was selling a RMB 9.9 billion stake in Shengjing Bank, which is headquartered in the city of Shenyang, in Liaoning province, to a unit of the local government in order to raise money to meet its financial obligations. Following that sale, Evergrande, which amounted to nearly 20 percent of the bank’s equity, retained a 15 percent interest in the financial institution.

Challenges Pile Up

The arbitration setback adds to Evergrande’s challenges just one month after the firm announced that it was fighting a winding up petition in Hong Kong.

Despite having promised creditors in January that it would roll out a comprehensive restructuring package for its $300 billion in debts by the end of July, Evergrande failed to present a plan by the end of Sunday, promising instead in an announcement to the Hong Kong exchange on Friday that it would attempt to present a detailed plan within this year.

In the statement to the bourse the developer controlled by billionaire Xu Jiayin  laid out a set of principles for repayment, including using equity in its property services and electric vehicle units to repay bondholders.