BEIJING – Several local governments in China have set up special custodian accounts for property projects by the country’s most indebted developer Evergrande to protect funds earmarked for housing schemes from being diverted, reported media outlet Caixin.
Reeling under a US$305 billion (RM1.27 trillion) debt, the property giant missed a payment deadline on a dollar bond last week, and its silence on the matter has set global investors wondering if they will have to swallow large losses when a 30-day grace period ends.
The special accounts have been set up since late last month in at least eight provinces where Evergrande has the most unfinished projects, said Caixin today, citing a source close to the developer’s management team.
These include Anhui, Guizhou, Henan, Jiangsu, and cities in the southern Pearl River Delta, it said.
The accounts aim to ensure homebuyers’ payments are used to complete Evergrande’s housing projects and not diverted elsewhere, such as to creditors.
In some southern cities like Zhuhai and Shenzhen, the offices of the Housing and Urban‑Rural Development Ministry are also involved in overseeing and reviewing the funds used in such projects.
Evergrande and the ministry did not immediately respond to requests for comment.
In recent months, the cash-strapped company, which epitomises the borrow-to-build business model, has stopped repaying some investors and suppliers, and halted building work on many of its projects across China.
Regulators had set a September 24 deadline for regional offices to report on the funding gaps facing Evergrande’s unfinished projects, said Caixin, but it is not immediately clear if this was met.
By end-June, Evergrande still had 1,236 projects for sale, it said in a semi-annual report, including those completed and under construction.
Last week, The Wall Street Journal said Chinese authorities have asked local governments to prepare for a possible collapse of Evergrande, urging them to prevent unrest and mitigate the ripple effects on the rest of the economy. – Reuters, September 26, 2021
