According to a court filing and media reports, two Hong Kong property agents are suing deeply indebted China Evergrande Group (3333.HK) for unpaid fees, putting pressure on the developer as it scrambles to obtain funds and avoid bankruptcy.
Centaline filed a lawsuit against Evergrande in September to recover HK$3.1 million ($398,196) in unpaid commissions, according to a court filing, while the South China Morning Post newspaper reported Midland Holdings (1200.HK) is claiming HK$43.45 million in unpaid commissions for two Hong Kong developments.
According to Reuters, Centaline China has also filed a lawsuit against Evergrande in a Guangzhou court in southern China, seeking hundreds of millions of yuan in damages.
Centaline confirmed to Reuters that it filed a lawsuit in Hong Kong last month, but declined to elaborate. Midland refuses to comment, citing the ongoing legal proceedings. Evergrande did not reply quickly to a request for comment.
Hong Kong’s exposure to debt-laden developer China Evergrande is “extremely modest,” at 0.05 percent of banking assets, or HK$14 billion ($1.79 billion), and would not pose any systemic issues, according to the newspaper, quoting the city’s Financial Secretary Paul Chan.
Evergrande has committed to compensate its mainland Chinese suppliers and contractors as quickly as possible, in some cases by delivering flats or other real estate assets, as building at many of its sites has been stalled due to late payments.
With $305 billion in liabilities, Evergrande has raised concerns that the liquidity crunch would extend across China’s financial system and echo abroad, a concern that has been alleviated by the Chinese central bank’s pledge last week to protect homeowners’ interests.
Concerns over Chinese property developer defaults spurred a sell-off in their shares and bonds on Tuesday, with fresh credit rating downgrades and uncertainty about the fate of cash-strapped China Evergrande Group sapping investor optimism.
It missed coupon payments on two-dollar bond tranches last month and is scrambling to liquidate assets to satisfy creditors, prioritizing payback to onshore lenders in recent weeks.