China asking state-backed firms to pick up Evergrande assets - sources

Shenzhen Investment

29/09/2021 24:47

(Repeats story that first ran on Tuesday, with no changes to
text)
    By Clare Jim and Jing Xu
    HONG KONG, Sept 28 (Reuters) - Beijing is prodding
government-owned firms and state-backed property developers such
as China Vanke Co Ltd  000002.SZ  to purchase some of embattled
China Evergrande Group's  3333.HK  assets, people with knowledge
of the matter said.
    Evergrande, saddled with $305 billion in liabilities, is
teetering on the brink of collapse. But the central government
is unlikely to intervene directly to resolve Evergrande's crisis
in the form of a bailout, according to six people, including
four in government and regulatory bodies.
    Authorities are hoping, however, that asset purchases will
ward off or at least mitigate any social unrest that could occur
if Evergrande were to suffer a messy collapse, they said,
declining to be identified due to the sensitivity of the matter.
    A handful of government-owned enterprises have already done 
due diligence on assets in the southern Chinese city Guangzhou,
said one person.
    In one emblematic example, Guangzhou City Construction
Investment Group is close to acquiring Evergrande's Guangzhou FC
Soccer stadium and surrounding residential projects, according
to the person, who has direct knowledge of the matter.
    Set to cost around 12 billion yuan ($1.9 billion), the
stadium https://www.reuters.com/business/china-evergrandes-construction-guangzhou-soccer-stadium-proceeding-planned-2021-09-27
 has been designed to seat more than 100,000, making it the
world's largest venue built for soccer by capacity.
    Potential buyers of Evergrande's core assets in Guangzhou
have been "arranged" with "both political and commercial
considerations" in mind, the person said, adding that
authorities don't want to see just a few companies bidding for
the same assets.
    Evergrande and Guangzhou City Construction Investment Group
did not immediately respond to requests for comment. The state
assets regulator, the State-owned Assets Supervision and
Administration Commission (SASAC), also did not immediately
respond to requests for comment.
    Vanke and China Jinmao Holdings  0817.HK  are among
government-backed property developers that have been asked to
purchase assets from Evergrande, sources said. China Resources
Land  1109.HK  has also been asked, one source said. 
    Property developers and government-owned firms have been
sounded out either directly or indirectly about asset purchases,
the sources said. Reuters could not immediately ascertain the
current status of most of those discussions.
    Vanke, which is one-third owned by Shenzhen's state-owned
subway operator, said in August it has talked with Evergrande
about cooperating on various projects. It did not respond on
Tuesday to a request for comment on the status of those
discussions. Jinmao and China Resources Land also did not
respond to requests for comment.
    Evergrande missed paying $83.5 million in interest to
offshore bondholders last week and has a $47.5 million coupon
payment due on Wednesday. 
    While expectations are high that it will undergo one of the
largest-ever restructurings in China, government bodies have
been largely silent on the potential for a bailout or how they
might deal with a collapse.
    Beijing has, however, worked to curb any ricochet effect on
the financial system from Evergrande’s troubles, with the
central bank pledging on Monday to protect consumers exposed to
the housing market and injecting more cash into the banking
system.  urn:newsml:reuters.com:*:nL1N2QT0OI
    One of the first signs of an official inquiry into the real
estate giant came this week when the Shenzhen government's
financial regulator said an investigation had been opened https://www.reuters.com/world/china/exclusive-china-evergrandes-wealth-management-arm-faces-local-government-inquiry-2021-09-27
 into an Evergrande wealth management unit. 
    One person with direct knowledge of local government
involvement said local governments have been asked to mediate
with government-backed groups and companies so they can
participate in Evergrande's reorganisation and asset sales.
    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 funding
situation of all Evergrande's businesses before taking any
action on its liquidity situation.
    "What kind of committee should be set up is a second story;
it depends on the debt situation," said one regulatory source.

 (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)
 ((sumeet.chatterjee@thomsonreuters.com; +852 3462 7757;))