Evergrande subsidiary ordered to pay $1.1bn over unpaid debt

Evergrande sign.

Crisis-hit Chinese property giant Evergrande says that one of its subsidiaries has been ordered to pay out 7.3bn yuan (£888.7m; $1.08bn) for failing to honour its debt obligations.

Evergrande Group (Nanchang) Co. Ltd must make the payment to a guarantor of its liabilities, the firm says. It came just two days after it outlined plans to restructure its foreign debts.

However, some commentators criticised the restructuring proposal for its lack of concrete details. On Sunday, in a statement to the Hongkong stock exchange, the company said its subsidiary had failed to fulfil its debt obligations to an unnamed guarantor.

Evergrande Group (Nanchang) Co. Ltd had pledged a total of 1.3 billion shares that it held in Shengjing Bank Co. Ltd as counter-guarantees. “As the borrowers failed to repay the loans, the applicant carried out its obligations under the guarantee and claimed against the subsidiary under the pledge,” Evergrande said.

On Friday, Evergrande made a long-awaited announcement about how it aims to restructure its foreign debts.

The company said it will offer its offshore creditors asset packages that may include shares in it overseas units – including an electric vehicles business and property services provider – as a sweetener.

However, the proposal was seen by some as not providing enough in the way of details on how Evergrande aims to restructure its huge liabilities.

Evergrande was once China’s top-selling property developer but has for months been struggling under the weight of more than $300bn of debts, of which around $20bn is held by investors from outside China.

The announcement came as China’s real estate sector, which accounts for about a third of the world’s second biggest economy, faces a major cash squeeze.

A series of debt defaults involving several of the country’s heavily indebted developers has spooked investors who fear contagion in the sector.

China’s property crisis is estimated to have wiped more than a trillion dollars off the value of the sector last year.

Last month, two of Evergrande’s top bosses resigned, after an internal probe found that they misused around $2bn in loans.

The company said that it found that chief executive Xia Haijun and chief financial officer Pan Darong were involved in diverting the loans secured by its property services unit to the wider group.

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