Evergrande lenders seek information on billions in seized funds

A group of creditors at China’s Evergrande is demanding additional information about the seizure of nearly $2 billion by local banks that could explain how the developer pledged the funds without investors’ knowledge, according to people familiar with the matter.

Last Friday, Evergrande released the preliminary results of an investigation into funds pledged as collateral for loans by an offshore subsidiary that manages properties built by Evergrande.

Evergrande also announced last week that it has fired its longtime CEO, Xia Haijun, and its chief financial officer, Pan Darong, for their involvement in the deals, as well as four executives from Evergrande and its subsidiary.

However, some creditors do not believe the company has sufficiently explained how the funds were guaranteed to the banks without any form of disclosure to investors.

They received no explanation other than what the company said publicly about the seized money.

This week, a group of Evergrande’s largest offshore creditors, which have secured debt backed by the subsidiary’s assets, wrote to the company requesting additional information about which executives were directly responsible for the pledges, which banks claimed their rights to the assets and how the company specifically plans to compensate them for lost funds, which account for most of the subsidiary’s cash, the people said.

The ongoing tension between Evergrande and its foreign creditors underscores how the company has struggled to meet investors’ demands for transparency nearly eight months since it defaulted on its foreign debts and just days before the early launch of a restructuring plan that the company promised to deliver by the end of this month.