PwC resigns as auditor of indebted Chinese real estate firm Evergrande: Report

Chinese property developer Evergrande announced that global accounting firm PwC had resigned as its auditor. According to a Financial Times report, the two companies had differing views on financial statements that are under investigation by Hong Kong regulators. PwC’s resignation letter was sent to Evergrande’s board on Monday, the company revealed in an exchange filing. Both companies have declined to comment over the report. Evergrande, the most indebted real estate company in the world, has said it would appoint Hong Kong-based firm Prism Hong Kong and Shanghai, as its new auditor, until the end of the upcoming annual meeting in June. Evergrande as well as PwC have been investigated by Hong Kong’s audit regulator, the Accounting and Financial Reporting Council, since 2021 over the indebted property developer’s 2020 accounts. Last year, the investigation widened to include a $2 billion loan scheme that had led to an executive clear- out. The probe put more pressure on Evergrande after it failed to meet a self-imposed deadline for restructuring its $300 billion liabilities. What was the dispute between Evergrande and PwC about? The two firms disagreed over several issues, as revealed in the exchange filing. PwC had said that Evergrande did not provide enough details on the $2 billion loan scheme under investigation. It also did not give out enough information on “an independent committee investigation into an undisclosed deposit pledge related to the company’s EV unit Evergrande New Energy Vehicle”, as per The Financial Times. PwC alleged that Evergrande also failed to settle certain interest- bearing liabilities and loans that were due by the agreed date. What happens now? Evergrande has been in contact with its creditors in Hong Kong over the past few days to update them on its progress. The real estate developer has offered installment repayments over 12 years on principal of offshore debt as well as some tweaks to its debt-to-equity swaps. This is expected to allow investors to convert offshore debt into shares of Evergrande’s Kong-listed electric Hong vehicle unit and property management unit, according to a lawyer familiar with the negotiations. But international negotiators, who hold about $20 billion of Evergrande’s debt, have been frustrated by the lack of concrete developments in the restructuring. International auditors have been stepping back from Chinese developers that defaulted, after a slew of unreleased financial records increased concern over the full scale of debts incurred by the companies. Read all the Latest News, Trending News, Cricket News, Bollywood News, India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.