Evergrande hires consultants to investigate $2 billion cash seizure

A quartet of outside law firms and accountants will help investigate how banks ultimately took control of more than $2 billion at a key subsidiary of China Evergrande Group.

Last week, the heavily indebted Chinese real estate developer and its Evergrande Property Services Group GmbH.

said the lenders had enforced their rights over 13.4 billion yuan, or about $2.1 billion, in bank deposits pledged by the subsidiary to guarantee third-party borrowing.

The professional advisors will work with non-executive directors at Evergrande EGRNF 9.11%

and its property services unit after both companies set up board committees to investigate the incident.

“Preliminary investigations indicate that the pledging of the relevant deposits and enforcement occurred in 2021,” Evergrande said in a filing with the Hong Kong Stock Exchange late Tuesday.

China Evergrande said it will hire Reed Smith Richards Butler LLP, while its subsidiary will appoint DLA Piper, Jincheng Tongda & Neal and Grant Thornton China. Both companies said investigative committees have begun gathering information and will seek to complete their investigations as soon as possible.

Shares in the two Hong Kong-listed companies and another major subsidiary of Evergrande, China Evergrande New Energy Vehicle Group GmbH.

had been stopped since March 21.

On Wednesday, shares of the automaker, also known as Evergrande Auto, resumed trading, falling as much as 14% in morning trade. Evergrande Auto said it was seeking more information about the bail seizure. “The Board believes this primarily affects a sister company,” he added.

Evergrande Auto said its shares would be reinstated from Friday as it missed Hong Kong’s March 31 deadline to release audited full-year results. It said it expects to release the audited results in about three months.

Evergrande and Evergrande Property Services, whose shares are still on hold, have both said they will also miss the verified results deadline.

In another filing, Evergrande said it had agreed to divest a stake in Crystal City, a project in east China’s Hangzhou city, for 3.66 billion yuan, or about $575 million.

The two state-owned buyers will pay Evergrande within 20 months of the closing of the sale, it said. About a quarter of the proceeds will be used to pay back construction fees owed to one of the buyers, Evergrande added.

Evergrande is China’s most indebted real estate developer with debt equivalent to more than $300 billion (as of June 2021). The company defaulted on its offshore debt in December.

Last week, Evergrande told offshore creditors it was on track to present a global restructuring plan by July, but warned there could be additional commitments and guarantees from the company’s offshore subsidiaries to onshore entities.

Write to Clarence Leong at clarence.leong@wsj.com

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https://www.wsj.com/articles/evergrande-hires-advisers-to-probe-2-billion-cash-seizure-11648613500?mod=rss_markets_main Evergrande hires consultants to investigate $2 billion cash seizure

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