Some Evergrande suppliers join boycott of bank loans to homebuyers – sources

HONG KONG, July 20 (Reuters)Some suppliers of China Evergrande Group 3333.HK said they would stop repaying bank loans in protest at the struggling property giant’s non-payment, joining homebuyers threatening to end mortgage bonds for unfinished homes.

A growing number of homebuyers across China have threatened to stop making mortgage payments for stalled or unfinished property projects, deepening a housing crisis that has already hit the economy.

Two suppliers confirmed to Reuters an online letter written by small suppliers of Evergrande in central China’s Hubei province, dated July 15, in which they said they had to stop loan repayments because that the developer owed them money, leading to their own debt problems.

In the letter to local authorities and banks in Hubei, suppliers said 6 billion yuan ($889 million) of funds in an escrow account were misused by Evergrande, leading to stalled projects and payments missed. They were used as developers’ “funding tools”, they added.

Evergrande declined to comment.

The loan boycott was first reported by Caixin.

One of the suppliers based in Jiangxi, a neighbor of Hubei, told Reuters it was waiting for big companies in its province to take the lead in such action.

The value of the bank loans in question was not immediately clear, or whether any are already in default.

A broadening of the supplier lending boycott could add pressure on lenders’ lending books and on the country’s social stability, as protests by homebuyers have already reached an unprecedented scale.

More than 200 projects from at least 80 property developers across China have been affected by the mortgage boycott, the E-house China Research and Development Institution said in a report this week.

The mortgage crisis would not only threaten to kill a nascent recovery in China’s capital-starved real estate sector, but also hit banks with heavy writedowns, analysts have warned.

($1 = 6.7507 Chinese yuan renminbi)

(Reporting by Xie Yu, Writing by Clare Jim; Editing by Kirsten Donovan)

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