China Evergrande Group Faces Suits Over Unpaid Supplier Bills

China Evergrande Group is facing legal action from companies that say the property developer did not pay its bills, according to a Yahoo Finance report.

Huaibei Mining Holdings Co Ltd.’s lawsuit against Evergrande says that a division of the company missed payments and Huaibei Mining is now seeking 401 million yuan ($62 million) for fees and breach of contract, according to a Shanghai stock exchange filing cited in the Yahoo Finance report.

Meanwhile, Peace Tree Wood Ltd. says Evergrande hasn’t paid the 2 million yuan (about $310,000) in commercial bills it owes them.

These companies join Skshu Paint Co. in making their complaints against Evergrande public in an effort to be paid. Skshu said in a June 28 filing that Evergrande had paid only 4 percent of the 51 million yuan (about $8 million) it owed the company. Evergrande paid the full amount the day after Skshu’s public declaration.

Unpaid bills are, of course, nothing new and could be a bigger issue than most people realize. Some $556 billion worth of commercial paper issuance in China’s real estate market last year has raised concerns for government regulators, recent Reuters reports said.

Commercial paper is a common tool for property developers as a form of payable that assures suppliers of a future payment upon a fixed date. Reports noted that suppliers will typically sell that paper before that date for a small discount in order to unlock that capital more quickly.

But there has been a recent increase in late payments among developers that owe their suppliers, particularly among some of the industry’s largest firms, reports said.

Now, the Chinese government will look to require that developers disclose their commercial paper debts each month. Evergrande’s main onshore subsidiary owed $32 billion in commercial paper as of December, the most of any major Chinese real estate company, according to the Yahoo Finance report.

About half of the business-to-business (B2B) invoice payments in Asia are past due, Global Trade Review reported, citing the Atradius Payment Practices Barometer for Asia.

Companies in Asia that responded to the Atradius survey noted that they are encountering “serious setbacks” to expansion, despite an overall economy recovery. To that end, 40 percent of those who responded said that the payment practices of their clients have gotten worse during the last year.