China urges state-backed companies to reclaim Evergrande assets: report

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Beijing is pushing state-owned enterprises and state-backed real estate developers, such as China Vanke Co Ltd, to buy some of the struggling China Evergrande group’s assets, people with knowledge of the matter said.

Evergrande, struggling with $ 305 billion in liabilities, is on the brink of collapse. But the central government is unlikely to intervene directly to resolve the Evergrande crisis in the form of a bailout, according to six people, including four from government and regulatory agencies.

Authorities hope, however, that the asset purchases will avoid or at least alleviate social unrest that could arise if Evergrande were to suffer a disorderly collapse, they said, declining to be identified due to the sensitivity of the matter.

A handful of state-owned companies have already performed due diligence on assets in the southern Chinese city of Guangzhou, one person said.

In an iconic example, Guangzhou City Construction Investment Group is set to acquire the Guangzhou FC Evergrande football stadium and surrounding residential projects, according to the person, who has direct knowledge of the matter.

At a cost of around 12 billion yuan ($ 1.9 billion), the stadium was designed to accommodate more than 100,000 people, making it the largest stadium in the world built for football in terms of capacity.

The potential buyers of Evergrande’s main assets in Guangzhou have been “arranged” keeping in mind “both political and commercial considerations,” the person said, adding that authorities do not wish to see a few companies bid for the project. the same assets.

Evergrande and Guangzhou City Construction Investment Group did not immediately respond to requests for comment. The state asset regulator, the Commission for the Supervision and Administration of State Assets (SASAC), also did not immediately respond to requests for comment.

Vanke and China Jinmao Holdings are among the government-backed real estate developers who have been asked to buy assets in Evergrande, sources said. China Resources Land was also questioned, a source said.

Real estate developers and state-owned companies have been polled directly or indirectly on asset purchases, the sources said. Reuters could not immediately determine the current status of most of these talks.

Vanke, who is third-party owned by the public operator of the Shenzhen Metro, said in August that he discussed cooperation with Evergrande on various projects. He did not respond to a request for comment on the status of those talks on Tuesday. Jinmao and China Resources Land also did not respond to requests for comment.

Evergrande failed to pay $ 83.5 million in interest to offshore bondholders last week and is due to pay a coupon of $ 47.5 million on Wednesday.

As it is expected to undergo one of the most significant restructuring ever in China, government agencies have remained largely silent on the potential of a bailout or how they could. face a collapse.

Beijing, however, has made efforts to limit any ripple effects on the financial system of Evergrande’s problems, with the central bank pledging on Monday to protect consumers exposed to the real estate market and to inject more liquidity into the banking system.

One of the first signs of an official investigation into the real estate giant came this week when the Shenzhen government’s financial regulator said an investigation had been opened into an Evergrande wealth management unit.

A person with first-hand knowledge of the involvement of local governments said that local governments have been asked to arbitrate with government-backed groups and companies so that they can participate in the reorganization and sale of assets. of Evergrande.

Any action taken by local governments will depend on the extent of Evergrande’s presence in those areas and the local finances of that particular province or city, the sources also said.

They added that regulators will first assess the financing situation of all Evergrande activities before taking action on its liquidity situation.

“What kind of committee should be put in place is a second story; it depends on the debt situation,” a regulatory source said. (Reporting by Clare Jim in Hong Kong and Jing Xu in Beijing; Additional reporting by Cheng Leng and Yingzhi Yang in Beijing; Editing by Sumeet Chatterjee and Edwina Gibbs)

This story was posted from an agency feed with no text editing. Only the title has been changed.

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