China Evergrande’s struggle to pay its debts produced more drama this past week as lenders to the world’s most indebted developer took steps to seize its Hong Kong headquarters.
The unidentified lenders to Shenzhen-based Evergrande have appointed a receiver to sell the group’s 26-storey Wan Chai office tower, according to market sources who spoke with Mingtiandi, confirming an earlier report by Reuters.
The office block in Hong Kong’s Wan Chai district, which Evergrande purchased for a record $1.61 billion in 2015, had been pledged to a group of lenders led by China CITIC Bank International in return for a loan, according to a report by the Financial Times, which first reported the news.
Evergrande’s creditors have hired US restructuring specialist Alvarez & Marsal to liquidate the property as efforts by the developer to market the asset at around HK$9 billion ($1.15 billion) have struggled to reach a deal.
Involuntary Portfolio Reduction
CITIC Bank notified investors last September, without giving details, that its loans to Evergrande were pledged against valuable security, according to the FT.
Evergrande has seen a number of assets stripped from its grasp in recent weeks with a mainland court having auctioned off the developer’s remaining 14 percent stake in Shenyang’s Shengjing Bank earlier this month for RMB 7.3 billion ($1.1 billion) after the company lost an arbitration case brought by creditors.
In August the city of Guangzhou took over a football stadium that Evergrande was building in the capital of Guangdong province in return for RMB 5.52 billion in compensation, with Evergrande recording a RMB 1.26 billion loss on the forfeit after failing to complete the project.
Evergrande had promised to present a plan for restructuring its estimated $300 billion in debts by the end of July, and since it failed to present a detailed scheme, has seen a series of moves by creditors to advance debt resolution unilaterally.
In July, Li Ka-shing’s CK Asset Holdings was said to have placed a bid for the tower after a reported attempt last year to sell the largest single property asset in Evergrande’s portfolio to state-owned Yuexiu Property for about $2 billion failed to result in a transaction.
The July tender for the property, which was managed by brokerage firm Cushman & Wakefield, was set to end on 28 July, however, the firm is reported to still be marketing the asset on Evergrande’s behalf.
Picking Up the Pieces
CITIC, which was founded in 1979 and ranks as China’s largest conglomerate, has a track record of mopping up developer miscues.
In July, the state-run group announced that it had taken over stakes in five Kaisa Group projects in Shenzhen worth more than RMB 60 billion ($8.9 billion) as part of a debt restructuring.
CITIC previously came to Kaisa’s rescue in 2015 after the developer’s projects were locked up by the Shenzhen government as part of a corruption investigation causing Kaisa to default on a $26 million dollar bond.
That same year, CITIC acquired a 40 percent stake in Chinese developer Advanced Business Park’s Royal Albert Docks regeneration project in east London after that development backed by then-mayor Boris Johnson stalled from lack of customers.