Lenders to the struggling Chinese developer Evergrande Group have appointed a receiver to seize its Hong Kong headquarters, two sources have said, as the world’s most indebted developer struggles to emerge from its debt crisis.
Evergrande is saddled with more than $300bn (£260bn) in liabilities and has been kept alive by a government-run rescue operation since it defaulted on $22.7bn of overseas debts in December last year.
It has been trying to sell its 26-storey China Evergrande Centre in Hong Kong’s Wan Chai district as part of its asset disposal effort aimed at raising funds.
The Financial Times, which first reported the news, said a lender, which has not been named, told Evergrande earlier this week that it had appointed a receiver to take charge of the property, which is valued at $1.27bn, and force a sale, the sources said.
The Hong Kong tower has been pledged for a loan by lenders led by China Citic Bank International, the Hong Kong subsidiary of the Chinese state-owned bank China Citic Bank Corp Ltd.
Evergrande declined to comment. Citic Bank did not immediately respond to Reuters’ request for comment.
Reuters reported in July, citing sources, that Evergrande was looking to sell its Hong Kong headquarters via a tendering process and that the sale proceeds would be used to repay offshore creditors as part of the debt restructuring plan.
However, one person familiar with the situation said on Thursday that during the July sale about three bidders had offered less than the $1.27bn valuation, and that the bid was too low for Evergrande to accept.
Evergrande missed a self-imposed deadline to provide a detailed restructuring proposal by the end of July. It said in an update that month that the due diligence process was continuing, and it expected the work to be completed in the near future, with an aim to announce a specific plan in 2022.
The Chinese housing market has driven growth for the past two decades and now represents the biggest asset class in the world, with a notional value of between $55tn and $60tn, which is bigger than the total capitalisation of the US stock market.
However, developers are now going bust after being deprived of easy credit; prices are falling; homeowners are refusing to pay mortgages on unfinished homes, and the slump in construction and properties being sold is crippling local governments that rely on land sales for income.
The debt crisis in China’s property sector was initially brought on by a Beijing-led crackdown on reckless lending, and has led to forecasts that sales of homes in the country could fall by one-third this year, increasing pressure on struggling developers to complete pre-sold properties.