Indebted China Evergrande faces lawsuit for delay in construction payments Reuters

HONG KONG (Reuters)-China Huaibei Mining Holdings said its construction department is suing Evergrande, the country’s most indebted real estate developer, for overdue payment of 400 million yuan ($62 million).

Huaibei Mining stated in a document on Wednesday that Evergrande’s project company in the eastern province of Anhui has repeatedly refused to pay the construction fees it owes to the Huaibei unit, including the commercial paper Evergrande issued to the unit, on the grounds that it is short of money, despite the fact that Six requests for repayment.

On Friday, Evergrande stated in a stock exchange document that the two parties are disputing whether the contractual payment is due. It stated that its flagship subsidiary Evergrande Real Estate Group Co., Ltd. has filed an objection to the court because it is not a party to the contract and therefore there is no legal and contractual basis for the lawsuit brought against it.

The construction unit of Huaibei signed a contract with the project company of Evergrande in November 2018 and has completed the construction work, according to the filing of the mining company, but did not specify the expiry date of the commercial paper.

Commercial bills are not counted as interest-bearing debts, and are usually used in the real estate industry to pay construction suppliers, promising to pay on a fixed date in the future (usually within one year).

Evergrande admitted in June that its project company had not paid part of the commercial paper on time, but said that after it was arranging the payment, concerns about developer debt and its potential systemic financial risks have intensified. Fitch downgraded its credit rating on Wednesday, indicating its concerns about potential defaults.[nL1N2P40Q8]

The developer is the largest issuer of commercial paper in the country. The documents show that its flagship unit Evergrande Real Estate Group has 205.7 billion yuan (32 billion U.S. dollars) worth of commercial paper at the end of 2020, an increase of 24% and 390% over 2019 and 2015, respectively.

($1 = 6.4733)