The Chinese government summoned on Friday (3) the founder of the real estate giant Evergrande after the company warned that “there is no guarantee” of sufficient funds to meet its financial obligations.
Evergrande, which has a massive $300 billion (BRL 1.7 trillion) in debt, faces problems meeting its commitments that have fueled concern across the entire real estate sector, a substantial part of the world’s second-largest economy.
On Friday, Evergrande warned in a statement to the Hong Kong stock exchange that, given its current liquidity situation, there is “no guarantee that the group will have sufficient funds to continue meeting its financial obligations”.
Shortly thereafter, the Guangdong provincial government said in a statement that it had “immediately summoned Xu Jianyin and (…) agreed to send a working group to the Evergrande Real Estate Group to oversee and promote enterprise risk management.”
The company is one of several real estate companies in turmoil over the past year after Beijing launched a regulatory campaign to curb speculation and debt, cutting off a crucial avenue to access resources.
Evergrande, China’s second-largest real estate developer by volume, has so far avoided bankruptcy.
A unit of Evergrande has coupon bonds worth $82.5 million (R$465.5 million) that expire on Monday, Bloomberg reported this week.
On Friday, Xu (Hui Ka Yan in Cantonese), the group’s founder, sold 1.2 billion shares of Evergrande for $344 million (BRL 1.9 billion) reducing his stake from 77% to 68%.
Beijing’s regulator has asked the tycoon to use his personal fortune to finance Evergrande’s debt.
On the same day, the group’s vehicle unit claimed to have returned vacant land worth US$ 188.4 million (1.06 billion), and that it is in dialogue with potential buyers to dispose of other assets.
‘Blind Expansion’
The real estate sector, key to Chinese growth, has cooled in recent months due to stricter regulation of property purchases, as well as liquidity problems affecting some of the country’s large groups.
“Evergrande Group’s risks are mainly due to poor driving and blind expansion,” China’s central bank said in a statement published on Friday.
“The short-term risks of some real estate companies do not affect market liquidity in the medium and long term,” he added.
Another Chinese group, the Kaisa Group, is also facing bankruptcy after announcing on Friday the failure of an exchange offer that would have given it extra time.
Last month, Kaisa had presented a plan to delay payment on its bonds in exchange for at least US$380 million (R$2.1 billion) in bills of exchange, which would have given it room to find funds. .
But the offer did not have the 95% support from bondholders needed to move forward.
In a statement published on Friday, the company said it continued to seek solutions, “which include, among others, the renewal and extension of loans, and the disposition of assets.”
But, “there is no guarantee” that it can meet the maturity of existing bills of exchange. On Tuesday, US$ 400 million (R$ 2.3 billion) in bills of exchange matures, he added.
Failure to pay, the company risks triggering a cross-default of its debt.
All these problems have led Beijing to show signs that it wants to reverse its restrictive regulations on the real estate sector.
The city of Chengdu (southwest) last month became the first to announce facilities for companies to sell property.
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