Evergrande fire sale just getting started as debt woes mount

Beijing

UNDER mounting pressure from financial regulators to shore up its finances, China Evergrande Group is poised to dump more of its sprawling empire.

The clock is ticking for billionaire Hui Ka Yan and his company, which is laden with US$300 billion in liabilities to banks, suppliers and homebuyers.

Despite getting temporary relief from some major creditors, the message from policymakers is clear: Evergrande must resolve its debt woes fast enough to avoid roiling the world's second-largest economy.

That means demonstrating its goodwill by quickly selling assets, potentially at steep discounts. Evergrande may offload its Hong Kong headquarters and a large residential land parcel in the city at a loss.

Since March, spooked investors have shaved about US$78 billion from the value of Mr Hui's electric vehicle (EV) and property management units, which are also on the block.

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The share declines will dent how much Mr Hui can hope to recover from asset sales. BNP Paribas estimated in June that the Shenzhen-based developer had US$80 billion worth of equity in non-property businesses that could help generate liquidity if sold.

"Evergrande bonds will ultimately rise or fall based on the company's ability to monetise non-core assets ahead of existing repayment schedules and before Beijing runs out of patience," said Brock Silvers, chief investment officer of Kaiyuan Capital in Hong Kong.

Evergrande's 8.75 per cent dollar bond due in 2025 slipped 1 US cent to 36 cents on Friday morning, heading for a fresh low, Bloomberg-compiled data showed. Its shares rose 4.7 per cent in Hong Kong trading, paring this year's drop to 70 per cent.

In recent months, Evergrande has only raised about 10 billion yuan (S$2.09 billion) by paring its holdings in the EV arm, an Internet subsidiary, a small onshore property firm and a regional bank. BLOOMBERG