China urges Evergrande's Hui to tap wealth; firms to repay

[BEIJING] China has urged companies to make payments on their offshore bonds and asked China Evergrande Group's billionaire founder Hui Ka Yan to tap his personal wealth to help solve the company's deepening debt crisis.

Officials from the National Development and Reform Commission and the State Administration of Foreign Exchange told developers at a meeting in Beijing on Tuesday that they must make payments on time if possible, according to people familiar with the matter.

Any developer that can't meet its debt obligations must inform regulators immediately, the people said.

Meanwhile, Hui - who has collected more than US$7 billion in dividends from the company over the last 12 years - is facing pressure to dig into own resources to ease the credit crunch at the embattled developer. His associate also pledged a house in Hong Kong as collateral for a loan.

China has clamped down on the indebted real estate sector, making it difficult for developers to refinance as they face falling home prices and sales. Multiple developers have defaulted this month, although Evergrande made a coupon payment last week.

The focus now turns to the end of a grace period on another Evergrande dollar bond later this week with creditors bracing for an eventual debt restructuring that could rank among the largest ever in China. Evergrande's bonds edged higher and its shares were little changed.

As Evergrande struggles to meet obligations to creditors, suppliers and homeowners, authorities in Beijing are urging Hui to alleviate the crisis with his own wealth. The directive came after Evergrande missed an initial Sept 23 deadline for an interest payment on one of its dollar bonds, according to people familiar with the matter.

Evergrande pledged a house on the peak in Hong Kong held by Chairman Hui to China Construction Bank (Asia) as collateral for a US$38.6 million loan.

The 5,000-square-foot house on Black's Link was pledged as collateral to China Construction Bank (Asia) on Oct 19 for a mortgage loan. The current market value of the house is about HK$700 million (S$121.4 million).

BLOOMBERG