Real estate: a subsidiary of Evergrande in China ordered to pay a huge amount

Real estate: a subsidiary of Evergrande in China ordered to pay a huge amount

The group, which is struggling for its survival, said a subsidiary of Chinese real estate giant Evergrande, which is in debt paralysis, must pay more than $1 billion in security after a disrespectful refund. Evergrande is the former number one real estate industry in China, a key sector for the growth of the Asian giant, which accounts for more than a quarter of its GDP. After being strangled by a massive debt, the promoter is on the verge of bankruptcy. Last year’s arrears at Evergrande were estimated at about $300 billion. Hardly, one of the promoter’s affiliates, Evergrande Group (Nanchang), is unable to repay the loan. The real estate group said Sunday, citing arbitration, that the company would have to pay the loan guarantee, or $1.3 billion of shares held by Evergrande in Shengjing Bank, as compensation.

The financial health of Evergrande worries markets because the collapse of a group in China, which once had 200,000 employees, will have dire consequences for the economy. Real estate has long served as a driving force in China, in a country where the acquisition of property is often a prerequisite for marriage and investment. Strangled with debt, Evergrande was due last month to unveil the outlines of a restructuring plan aimed at saving the group. But the promoter did not provide any specifics, saying only “positive progress” on Friday.

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The real estate sector is in crisis

To get its head above water, Evergrande has in recent months tried to reduce its stakes in companies and sell assets. The promoter is particularly seeking to dispose of its Hong Kong headquarters, a 26-storey building valued at more than one billion euros. Evergrande’s poor financial condition is in turn punishing its competitors as buyers are increasingly reluctant to invest in the stone, contributing to the worsening crisis in the sector.

Evergrande fired its CEO and CFO last month after an internal investigation implicated them. Evergrande was investigating why banks had unexpectedly confiscated nearly €2 billion in bank deposits from its real estate services unit, Evergrande Property Services.

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