(Yicai Global) Nov. 2 -- Debt-laden property developer China Evergrande said yesterday that its unit has received an enforcement notice for unrecoverable funds from Shengjing Bank.

Following the notice, Shengjing Bank [HKG: 2066] and China Evergrande [HKG: 3333] both suspended trading today.

China Evergrande had received as much as CNY32.5 billion (USD4.47 billion) in funds from Shengjing Bank as a former shareholder over two years. Having failed to recover the funds, the Shenyang-headquartered lender filed a lawsuit in a court in northwestern Chinese city.

Its subsidiary Evergrande Group received an enforcement notice from the Shenyang Intermediate People’s Court, the financially troubled real estate developer announced yesterday, adding that a 30.99 percent stake in Xinjiang Guanghui Industry Investment Group pledged to Shengjing Bank will be auctioned and sold to repay the lender.

The funds, totaling CNY32.595 billion, were provided to Shengjing Bank between 2020 and 2021, and as of the date of the announcement, the pledged equity has yet to be auctioned or sold.

So far, China Evergrande has not disclosed the date, method and whether it is overdue for the outstanding funds. In Shengjing Bank’s public statements, it is difficult to find any direct information.

In fact, China Evergrande may have received more funds from Shengjing Bank.

Calculated on the data of United Credit in a rating report in 2021, at the end of 2019, the risk exposure scale of Shengjing Bank’s largest single non-interbank customer was as high as CNY155.232 billion (USD21.33 billion). At the end of 2020, the stock still exceeded CNY90 billion. However, because United Credit did not disclose the name of the corresponding enterprise, the true identity of this customer of Shengjing Bank has been unknown.

In September, China Evergrande broke all equity links with Shengjing Bank, which in 2016 held a 36.4 percent stake in the former.

According to its semi-annual report, as of the end of June, Shengjing Bank’s overdue loans were CNY28.5 billion yuan, of which about CNY9.3 billion (USD1.28 billion) remained unrepaid for one to three years. The balance of non-performing loans was CNY19.69 billion, with a non-performing ratio of 3.26 percent. During the same period, the corresponding financial investment amount in the impairment loss of the bank’s assets was CNY1.93 billion.

According to Guanghui’s website, the group’s business mainly covers energy development, automobiles, logistics, and real estate. Since 2017, it has been among the Global 500 for six consecutive years, with total assets of CNY272.119 billion, revenue of CNY203.223 billion and net profit of CNY4.853 billion in 2021.

Editor: Peter Thomas