Another crisis for China Evergrande and it seems another multi-billion dollar accounting/governance debacle.
The stricken property developer is now confessing that it will not be able to publish its financial results for 2021 by March 31 as required by stock listing rules, as audit work has not yet been completed.
Its two Hong Kong-listed units, China Evergrande New Energy Vehicle Group and Evergrande Property Services Group, also said the publication of their financial results will be delayed.
The statement, the second in two days from the companies raises further doubts about the company’s financial viability.
Monday saw Evergrande request trading by halted on the Hong Kong Stock Exchange in its shares, as well as shares of several associated companies.
No reason was given on Monday but Tuesday’s filing seems to provide an answer.
Evergrande said in the exchange filing that due to “drastic changes” in its operations since the second half of last year, the auditor has added a large number of additional audit procedures.
The developer said it will publish the audited annual results “as soon as practicable” after the audit procedures have been completed.
As required, a trading suspension in Evergrande shares will remain in place until the latest results are published and that applies to its associated companies.
And unless there is a change that we haven’t been told about, Evergrande will be in the news again on Wednesday when an expected $US2 billion repayment obligation is due to be paid to creditors, with another next month of $US1.4 billion.
If it can’t get its accounts finished on time, there’s doubt that it can find $US3.4 billion in a month to meet creditor payments – unless the Chinese government magicks money from one of its bailout funds.
But further doubt about the company’s finances and whether anyone truly understands or knows what has been going on has come from a separate stock exchange filing by Evergrande Property Services.
That company said around 13.4 billion yuan ($US2.1 billion) of its bank deposits that had been pledged as security for third party guarantees had been claimed by the relevant banks.
The property management company said it will set up an independent investigation committee to investigate the pledge guarantees.
That the company has had to set up an ‘inquiry’ to find out how and why this $US2.1 billion has been used, is a very worrying development.
Fancy not being able to account for $US2.1 billion. Makes the payment of the $2 billion problematic, even if there is the usual 30 day period of grace involved.
It also raises questions about the Chinese government’s role in the work out that the company is now involved in.
China Evergrande was due to conduct a briefing with three senior executives late Tuesday. Without accounts, that briefing will be hamstrung.
Sounds like a bottomless black pit getting deeper – especially with over $US300 billion of mostly local (and some foreign) debt that clearly can’t be serviced.
