Embattled Chinese developer China Evergrande Group in a preliminary investigation said, the $2.1 billion of deposits at its property-services unit was pledged last year as the developer’s side into distress accelerated.
Evergrande has set up independent investigation committee to look into the pledges which was earlier enforced by the banks, according to a statement to the Hong Kong stock exchange late Tuesday.
The latest announcement met with investors at worry about how the funds at the property-services unit came to be used as security. The pledge wipes out most of Evergrande Property Services Group Ltd.’s cash holdings.
The service unit of the group has long been considered the strongest unit despite the main units financial distress condition.
Evergrande’s independent investigation committee, chaired by independent non-executive director Chau Shing Yim, has appointed Reed Smith Richards Butler LLP as professional adviser, according to the statement.
Meanwhile, Evergrande said a unit had agreed to sell a property project in Hangzhou, China for 3.66 billion yuan to state-owned buyers as it seeks to raise cash to pay back creditors. Part of the proceeds will be used to repay construction fees owed, the developer said.