Evergrande Group’s chief executive is deep into talks with investment banks and creditors over a possible restructuring and asset sales, sources have said, as the Chinese developer battles against a $300 billion default threat
CEO Xia Haijun, a confidant of chairman Hui Ka Yan who runs Evergrande’s day-to-day operations including financing, has been in Hong Kong, where the property firm has a major presence, for more than two months, it’s claimed.
A third source said Xia was talking to banks and creditors in Hong Kong but did not say what was being discussed.
Shenzhen-headquartered Evergrande, which is reeling under more than $300 billion in liabilities, has left its offshore investors in the dark about repayment plans after already missing three rounds of interest payments on its dollar bonds.
Xia’s talks with investment banks and creditors in Hong Kong have not previously been reported.
One of the sources said Xia needed to communicate with foreign banks on loan extensions and repayments. The source declined to disclose the identity of the creditors that Xia had spoken to in recent days.
“Xia also needs to sort out how many off-balance sheet debts the group has offshore, because many were underwritten at subsidiary levels and he himself may not be even aware of [that],” he said. “Before that they cannot work on restructuring and talk to bondholders.”
Evergrande has been scrambling to divest some of its assets to raise cash as concerns have grown in recent weeks about a possible collapse and the impact on global markets and China’s economy.
Chinese state-owned Yuexiu Property has pulled out of a proposed $1.7 billion deal to buy Evergrande’s Hong Kong headquarters building over worries about the developer’s dire financial situation, it was reported on Friday.
Banking Risk ‘Controllable’
Meanwhile, a Chinese central bank official said on Friday the spillover effect of Evergrande’s debt problems on the banking system was controllable and the risk exposures of individual financial institutions were not big.
Evergrande, once China’s top-selling developer, has said that it is looking to dispose of stakes in assets including its services and electric vehicle units to raise funds.
The developer is finalising details to sell 51% of its Evergrande Property Services unit to Hopson Development for HK$20 billion ($2.57 billion).
Investment bank Moelis & Co and law firm Kirkland & Ellis, representing bondholders who currently hold $5 billion worth of Evergrande nominal offshore bonds, demanded last week more information and transparency from Evergrande.
The developer said last month it had appointed Houlihan Lokey and Admiralty Harbour Capital as joint financial advisers to examine its financial options, as it warned of default risks amid plunging property sales.
- Reuters with additional editing by Sean O’Meara
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