What’s new: China Evergrande Group and its property services unit promised to fix their internal controls in response to an investigation into how banks ended up seizing 13.4 billion yuan ($2 billion) of the subsidiary’s deposits in late 2021.
The investigation found that several subsidiaries of Evergrande Property Services Group Ltd. had pledged the deposits as collateral for loans third-party firms took out from banks between March and August in 2021, the company said in a Wednesday filing to the Hong Kong Stock Exchange.
The loan funds had been diverted to China Evergrande and its subsidiaries, and couldn’t be repaid on time, resulting in the bank action, the probe carried out by an independent committee found.
No one at Evergrande Property Services approved the pledge plans, the company said in the filing.
In a filing the same day, China Evergrande acknowledged its directors who were involved with diverting the funds didn’t live up to the “standards expected.”
China Evergrande and Evergrande Property Services are currently in talks to repay the funds, chiefly by having the former transfer assets to the latter, the filings said.
The background: Evergrande Property Services didn’t know that the 13.4 billion yuan in deposits had been seized by banks until March last year when it was preparing its 2021 annual report.
The amount accounted for more than 95% of the company’s cash and bank deposits as of June 2021, according to its mid-year results that year.
Related: Evergrande Hong Kong Headquarters Building Seized by Creditor
Contact reporter Kelsey Cheng (kelseycheng@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)
Get our weekly free Must-Read newsletter.
