China’s housing regulatory agency has bolstered its supervision of the bank accounts of Evergrande Group so that the property developer does not divert funds to pay its creditors but only use them only to finish the construction projects, reported Bloomberg.
Citing sources familiar with the matter, the news agency report stated that the cash payments from these accounts will be subject to the state approval.
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In some cities, local bureaus have already commenced implementing the measures, the people added.
This move indicates that the houseowners are on top of the government’s priority list for managing the Evergrande crisis.
Banks, bondholders, and other creditors are seeking repayments on over $300bn in liabilities from the cash-strapped property developer.
To suppliers, the real estate firm owes about $147bn in trade and other payables. As of December 2020, it secured down payments on yet-to-be-finished projects from about 1.6 million homebuyers.
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By GlobalDataThe firm has not made any announcement on whether it met the 23 September deadline to make $83.5m in dollar-bond interest payments on a $2bn offshore bond, and a $47.5m dollar-bond interest payments due next week.
These bonds would stand to default if the firm fails to settle the interest within 30 days of the scheduled date of payments.
The restrictions on the bank accounts indicate that the government is taking a more active and serious role in the crisis as it is concerned that missed payments by the firm could trigger protests across the country, reported the publication.
Although property developers in the country can sell residential properties before construction is finished, they must deposit funds from these sales in supervised bank accounts so that the builders are stopped from abandoning projects or directing those funds for other purposes.
In July, authorities of a city reportedly put a halt on the sale of two Evergrande projects over allegations that the firm deposited only a portion of the proceeds from sales into the escrow accounts.
In September, the housing bureau in Nansha district created an escrow account under its own name so that Evergrande does not resort to diversion of the funds.
In a recent meeting, financial regulators have issued a set of instructions to Evergrande, encouraging the latter to take steps to avoid a near-term default on dollar bonds and focus on finishing its projects while repaying its investors.
Meanwhile, the authorities have urged the local governments to prepare for the possible downfall of the group, reported the Wall Street Journal, citing officials familiar with the matter.
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Houseowners are on top of the government’s priority list for managing the Evergrande crisis. Credit:
Free-Photos from Pixabay
