The debt burden continues to weigh on China’s Evergrande Group as its angry suppliers are protesting the developer’s unpaid bills while its bondholders’ patience has dissipated.

Nikkei Asia reported that a group of suppliers in Hubei province is threatening to stop paying their bank loans to force Evergrande to pay its unpaid bills.

In a notice circulating on social media, the suppliers have demanded payment from Evergrande. If not, they would stop paying loans issued to them by local banks.

A July 15 statement read: “We decided to stop paying all loans and arrears and advise our peers to decline any requests to be paid on credit.”

“And Evergrande shall bear the subsequent chain reaction from the risk to supply-chain (disruptions) due to these actions.”

The suppliers said in the notice that about $886 million in funds in an escrow account had been misused by Evergrande. That resulted in stalled projects and missed payments to them.

Hubei-based paint maker Badeshi is one of the unpaid suppliers. A Badeshi employee said that since August 2021, the company has only dealt with Evergrande on cash terms because the developer owed it tens of millions of yuan.

The suppliers began protesting following a movement to boycott mortgage payments against Evergrande.

Since late June, home buyers in hundreds of unfinished projects across China have threatened to stop paying mortgages until their homes are completed.

Seeking to quell the storm of mortgage boycotts, the Chinese authorities have recently censored the mention of the word ‘boycott’ on social media. Meanwhile, local regulators have pledged to speed up the completion of unfinished homes.

Reeling from a mortgage-payment boycott, Evergrande continued to face pressure from its massive debt load.

The Wall Street Journal cites sources saying that the Chinese real estate giant has not yet reached a restructuring agreement with its overseas bondholders.

Evergrande, with more than $300 billion in debt, defaulted on dollar debt in December.

In January, Evergrande pledged to release a preliminary restructuring plan by the end of July after the creditors demanded an update and threatened to sue the company. Now, the deadline to announce the restructuring plan is approaching.

The sources said that the creditors’ consultants had had lengthy negotiations with Evergrande on debt restructuring. The consultants still conduct due diligence on the company’s assets and liabilities.

However, some creditors are losing patience. According to WSJ, a foreign creditor filed a winding-up petition against Evergrande in Hong Kong last month, a move related to a financing obligation that the developer failed to meet.

The sources said that Evergrande had asked creditors to sign letters saying they did not support the petition. Many bondholders have already done so, but some have objected, citing a lack of transparency in the company’s restructuring process.

Sandra Chow is a co-head of Asia Pacific Research at CreditSights. She said: “We are quite pessimistic about the recovery of money from China Evergrande bondholders. But many investors are eager to see how China Evergrande disposes of its offshore debt.”

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