China Evergrande Group shared some more bad news on Sunday when it announced a loss of approximately $770 million on a project in Hong Kong’s New Territories.
The troubled developer’s latest financial failure is a result of receivers appointed by an Evergrande creditor having sold a 2.4 million square foot (223,000 square metre) site in Yuen Long formerly belonging to the company for just less than $637 million, Evergrande said in a statement to the Hong Kong Exchange.
The Shenzhen-based developer announced in January that receivers had seized the asset after it had been used as collateral for a $520 million loan which Evergrande had failed to repay. A report in the Financial Times at the time named US fund manager Oaktree Capital as the creditor acting to repossess the planned development.
The sale of the 268-unit villa project marks the latest setback for Evergrande, which last week saw creditors seize a HK$700M ($89 million) Hong Kong home said to be owned by chairman Xu Jiayin, with another set of receivers currently attempting to sell the company’s 26-storey headquarters in the city’s Wan Chai district.
Versailles in the New Territories
The final selling price of the plot was almost $390 million lower than the HK$8 billion (then $1.03 billion) that Evergrande had asked in an off-market attempt to sell the property in August of last year, according to a report by Sing Tao Daily.
Proceeds from the disposal of the Yuen Long site will be used to repay the financial obligations in relation to the project, the Sunday filing said. No information on the buyer was disclosed and sources at Oaktree declined to comment.
The debt-laden developer had invested as least HK$8.9 billion in the project, including acquiring the plot of farmland from Henderson Land in 2019 for HK$4.7 billion and paying nearly HK$4.2 billion last year to convert it to residential use, according to Sing Tao Daily.
Evergrande had proposed to build a total of 268 two- and three-storey villas on the site near the Mai Po Wetlands, which falls within the Hong Kong government’s planned Northern Metropolis. Raising eyebrows at the time was a plan to build a 240,000 square foot villa in the middle of the project described to resemble the Palace of Versailles.
Last week’s seizure of Evergrande’s house on Hong Kong’s Peak by China Construction Bank (CCB) Asia came one day after the tender for the sale of Evergrande’s Hong Kong headquarters closed with no apparent result.
That tower had been taken over by receivers appointed by China CITIC Bank International in early September.
Also last week, Evergrande said in a filing to the Hong Kong stock exchange that it received a notice of enforcement for unrecoverable funds totaling RMB 32.6 billion yuan ($4.5 billion) from Shengjing Bank Co Ltd.
Evergrande is also facing a winding-up hearing in Hong Kong’s court at the end of this month, after being sued by owners of overdue dollar bonds in June.
Last month, the developer met with holders of a RMB 2.1 billion onshore bond in a bid to extend the interest payment date by six months in a continued struggle to meet its debt obligations. Days before the deadline, bondholders agreed to an extension of interest payment on the domestic bond to 19 April 2023.
The company 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.
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