Evergrande chair resists asset fire sale as group teeters on default

China Evergrande chair Hui Ka Yan is resisting pressure to raise cash through rapid sales of the heavily indebted developer’s best assets, days after the group missed a bond payment deadline that is widely expected to trigger a formal default.

The assets include land, urban redevelopment projects in the Pearl River Delta — the prosperous southern Chinese region around Hong Kong — and the company’s property management unit, people familiar with the matter said.

“Hui wants to keep Evergrande’s most valuable assets unless he can sell them for a good price, which is not going to happen as everyone knows he is under stress,” said one person close to Chinese financial regulators.

Evergrande, the world’s most indebted real estate group with liabilities exceeding $300bn, missed a Monday deadline to repay bond coupons totalling $82.5m. While the group had still not transferred the funds as of Wednesday in New York, according to people familiar with the matter, neither the company nor the government has confirmed that it has defaulted on its debts.

Evergrande has also accelerated a lobbying campaign for more state bank support in recent weeks to help it avoid operational collapse.

The developer has told homebuyers and government officials in Wuhan and Nanning, two provincial capitals where it has stalled projects, that it was in talks with state governments for credit, according to two people familiar close to the company’s negotiations with local government officials.

Evergrande did not respond to a request for comment.

On November 22, an Evergrande representative in Wuhan said the company had applied for business loans from state lenders to support its operations there, according to meeting minutes seen by the Financial Times.

“If our loan application gets approved, we will consider paying off suppliers provided we complete the ongoing projects,” the executive said.

Evergrande has come closer to an official default this week than at any other stage of a marathon liquidity crisis that has spread to other businesses across the country’s vast real estate sector.

The group said on Friday that it was entering a restructuring process with assistance from officials dispatched by Guangdong province in southern China, where it is based. On Monday, Hui said that the group was forming a new risk management committee, with state representatives holding four of seven seats.

In its filing on Friday, Evergrande admitted there was “no guarantee” it would have “sufficient funds to continue to perform its financial obligations”, adding that it would “actively engage with offshore creditors” to formulate a restructuring plan.

Evergrande’s debt crisis has for months transfixed international markets, where it has borrowed heavily. Offshore bondholders complained in October of a lack of engagement from the company.

On Monday, the People’s Bank of China, the country’s central bank, unleashed $188bn of liquidity into the financial system in a bid to offset anxiety stemming from Evergrande’s debt crisis.

Evergrande has almost 800 projects across China, many of them funded by advance payments from homebuyers.

Local governments have ringfenced homebuyer deposits and other funds to ensure that Evergrande projects in their jurisdiction are completed and contractors paid on time.

The group’s central role in China’s property market poses acute political risks for officials tasked with managing its restructuring, underscoring the urgent need for new financing.

In September, the group’s failure to make payments on wealth management products bought by retail investors sparked protests outside its Shenzhen headquarters.

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