Heavy indebted Chinese property giant Evergrande says it will receive $818m after cancelling a contract to buy land rights for a new football stadium.
The stadium’s construction began over two years ago but has been plagued with problems for months. The stadium was for Guangzhou FC, a top-tier team in which Evergrande bought a controlling stake in 2010.
The company said the proceeds from the deal would be used to settle the debt related to the project. The announcement comes as Evergrande tries to raise cash to make loan payments.
Once China’s best-selling property developer, the firm is struggling under more than $300bn of debt, of which about $20bn is with investors outside the country.
In April 2020, the company paid $1bn to use the land and construction on the project got the same year underway. The $1.8bn (£1.5bn) stadium, expected to have at least 80,000 seats, was scheduled to be completed by the end of this year.
In 2010, Evergrande took over Guangzhou FC and changed its name to Guangzhou Evergrande Taobao FC.
With an infusion of new money, the squad was strengthened, immediately winning promotion to the top tier of Chinese football. Since 2011 it won the Chinese Super League title eight times, including seven seasons in a row.
However, the club is close to the bottom of the league this season.
At the start of last year, the club said it would revert to its original name – Guangzhou FC. Guangzhou is the capital and biggest city of Guangdong province in southern China.
On Sunday, Evergrande said that one of its subsidiaries had been ordered to pay out $1.1bn for failing to honour its debt obligations.
Evergrande Group (Nanchang) Co. Ltd must make the payment to a guarantor of its liabilities, the firm said. It came just two days after it made a long-awaited announcement about how it aims to restructure its foreign debts.
The company said it would offer its offshore creditors asset packages that may include shares in it overseas units – including an electric vehicles business and property services provider – as a sweetener.
However, the proposal was seen by some commentators as not providing enough details on how the firm aimed to restructure its huge liabilities. Last month, the firm said two of its top executives had resigned after an internal probe found that they misused around $2bn in loans.
Evergrande said it found that chief executive Xia Haijun and chief financial officer Pan Darong were involved in diverting the loans secured by its property services unit to the wider group.