Recently, Evergrande Group has attracted attention due to its huge debt problem, which has also led to the gradual intensification of internal contradictions between various business segments within Evergrande Group. However, unexpectedly, on the evening of November 28, Evergrande Property issued an announcement announcing that it would take Evergrande Group to court. This has aroused widespread attention and questions: as a subsidiary of Evergrande Group, Evergrande Property dares to file a lawsuit against Evergrande Group, what kind of story is hidden behind this?
According to the announcement of Evergrande Property, Jinbi Property, a subsidiary of Evergrande Property, was enforced by the bank to recover RMB 2 billion of deposit receipt pledge guarantee from Shenzhen Qihang Metal Materials***, Guizhou Guangjuyuan Real Estate, Evergrande Real Estate Group, Evergrande Real Estate Group and China Evergrande Group. In order to protect its own rights and interests, Evergrande Property decided to file a lawsuit with the Intermediate People's Court of Guangzhou City, Guangdong Province, demanding that the company involved return more than 2 billion yuan of funds, including 199.6 billion yuan of principal and 1$5.2 billion in interest. The lawsuit was officially filed on November 28, 2023.
As we all know, Jinbi Property is a wholly-owned subsidiary of Evergrande Property, which is a listed company of Evergrande Group and is owned by the famous businessman Xu Jiayin79%。At the end of June 2023, Xu Jiayin held 5978% of the shares. In short, both China Evergrande and Evergrande Property are companies controlled by Xu Jiayin, and they have a close relationship with each other. So, why would Evergrande Property sue Evergrande Group?This starts with the story of the previous years.
As early as a few years ago, Evergrande Group began to face liquidity difficulties and was unable to even repay its debts as they matured. In order to alleviate the risk of debt default, Evergrande Group has taken a series of emergency measures, including the financial means of demolishing the east wall and making up the west wall. In December 2020, Evergrande Group proposed a special financing business, using RMB 13.4 billion of certificates of deposit provided by Evergrande Property as pledge to raise funds for corporate operations. Of these, 131800 million yuan of funds flowed back to Evergrande Group through various channels, including the use of 97. on February 10, 2021500 million yuan redeemed an offshore bond.
If everything was normal for Evergrande Group, there should have been no problem with this pledged deposit. However, in 2021, Evergrande Group faced operational difficulties, resulting in a shortage of funds, and the huge deposit pledge of Evergrande Property was not returned on time. It was not until China Evergrande reviewed Evergrande's property that it found that 13.4 billion yuan of deposits had been forcibly frozen by the bank, and this news caused a shock in the market.
Although Evergrande Property is also a subsidiary of China Evergrande Group, the financial independence of Evergrande Property as an independent listed company cannot be ignored. However, Evergrande Group used the 13.4 billion yuan deposit receipts of Evergrande Property as a pledge without authorization, and used a huge amount of funds for the internal operation of Evergrande Group, which is obviously a violation of regulations.
After this incident, Xu Jiayin promptly dissociated himself from the incident, claiming that he had no knowledge of the incident. Although Xu Jiayin signed the relevant documents at that time, he did not know the specific contents, because the financing activities were operated by Evergrande's senior executives in charge of finance, and he simply signed them and did not participate in the specific operations. However, this does not exempt him from liability, signing means assuming legal responsibility, whether you know the specific content of the document or not, as long as you sign it means that you agree to the terms of it.
However, some people will be curious, since China Evergrande and Evergrande Property are both enterprises controlled by Xu Jiayin, why does Evergrande Property sue Evergrande Group?In fact, although Xu Jiayin holds nearly 50% of the equity of Evergrande Property, Evergrande Property is not entirely Xu Jiayin's personal business. Since the listing of Evergrande Property, it has been a public company owned by all shareholders. In addition to Xu Jiayin, Evergrande Property has other shareholders who enjoy the relevant rights and interests of Evergrande Property. Evergrande Group pledged 13.4 billion yuan of deposit receipts of Evergrande Property without authorization, resulting in the freezing of funds, which infringed on the legitimate rights and interests of other shareholders. Therefore, the other shareholders of Evergrande Property demanded that Evergrande Group return the 13.4 billion yuan certificate of deposit, which is a reasonable and legal request.
However, given the current predicament faced by China Evergrande, it is difficult for them to sustain themselves, and the frozen assets have long been unusable. Even if Evergrande Property sues China Evergrande and obtains a court judgment, it will need to auction the relevant assets and other means to achieve repayment. As for whether the full amount of 13.4 billion yuan can be recovered, it is unknown.
Through the prosecution of Evergrande Property, we can see the intensification of internal contradictions within Evergrande Group and the profound impact on the debt crisis. Evergrande's financial crisis not only led to the freezing of Evergrande Property's huge deposits, but also harmed the interests of other shareholders. The incident also exposed the problems of chaotic management and ineffective risk control within Evergrande Group.
At present, Evergrande Group is facing a severe risk of debt default, whether it is Evergrande Property suing Evergrande Group, or other creditors taking debt collection actions, it will bring great uncertainty to the future of Evergrande Group. For Evergrande Group, it is crucial to solve the debt problem and restore market confidence. However, as time goes on, the development of events remains uncertain, and we will continue to monitor the dynamics of Evergrande Group.