Evergrande's Hui summoned by Guangdong government

[BEIJING] China Evergrande Group Chairman Hui Ka Yan was summoned by the Guangdong government after the troubled property developer said it plans to work with creditors on a restructuring plan for its offshore debt.

The government will send a working group to the company to ensure normal operation, according to a statement on the government's website.

The development late Friday in Asia came after the developer said in a filing to the Hong Kong stock exchange that there's "no guarantee that the group will have sufficient funds to continue to perform its financial obligations," given its current liquidity status. The company said it had received a demand to perform its obligations under a guarantee in the amount of approximately US$260 million.

Evergrande is struggling to raise cash to meet its more than US$300 billion in liabilities, fueling concerns it's heading for a default that could hurt the world's second-largest economy.

In its statement, the company said if it's unable to meet its guarantee obligations or certain other financial obligations, it may lead to creditors demanding acceleration of repayment.

The developer has become one of the biggest casualties of Chinese President Xi Jinping's years-long effort to wring the excesses out of the country's debt-laden real estate sector. The question looming over global markets is whether Xi can tackle the problem - and pull off a sweeping campaign to bring "common prosperity" to China - without derailing the economy's fragile recovery from the pandemic.

Senior Chinese policy makers have tried to reassure investors that risks from Evergrande are contained, even as they signal a reluctance to bail the company out. The crackdown has begun to weigh on the real estate industry, which is now seeing home sales plunge and prices snapping a six-year streak of increases.

Authorities are laying the groundwork for a debt restructuring, assembling accounting and legal experts to examine the finances of the group, Bloomberg has reported. Evergrande has also hired financial advisers that are known to handle restructuring.

BLOOMBERG