China tells Evergrande to avoid dollar bond defaults, Bloomberg reports

Thursday,   23-Sep-2021   04:26 PM (IST)

Chinese regulators have asked China Evergrande Group to avoid a near-term default on its dollar bonds, Bloomberg Law reported on Thursday, the day the troubled property developer is due to make a much-awaited interest payment on its offshore debt. In a recent meeting with Evergrande 3333.HK executives, regulators said the company should communicate proactively with bondholders to avoid a default but didn't give more specific guidance, it reported, citing a person familiar with the matter. The Wall Street Journal reported separately on Thursday that Chinese authorities were asking local governments to prepare for the potential downfall of Evergrande, citing officials familiar with the discussions. Local governments have been ordered to assemble groups of accountants and legal experts to examine the finances around Evergrande's operations in their respective regions, the newspaper said, citing the people. They have also been ordered to talk to local state-owned and private property developers to prepare to take over projects and set up law-enforcement teams to monitor public anger and so-called mass incidents, a euphemism for protests, the WSJ said. A spokesperson for Evergrande, China's second-biggest property developer, declined to comment on the two reports. U.S. equity index futures Esc1, which had kicked as much as 0.8% higher on the day after the Bloomberg report, trimmed earlier gains to stand up 0.6%. Evergrande Chairman Hui Ka Yan urged his executives late on Wednesday to ensure the delivery of quality properties and the redemption of its wealth management products, which are typically held by millions of retail investors in China. He did not mention the company's offshore debt. Analysts said the moves underscored political pressure on Evergrande, whose liabilities run to 2% of China's gross domestic product, to contain the fallout from its credit crunch and protect mom-and-pop investors over professional creditors. Global markets have been on tenterhooks in recent weeks as looming payment obligations of Evergrande, which has a $305 billion mountain of debt, triggered fears its difficulties could pose systemic risks to China's financial system. The company has $83.5 million in dollar-bond interest payments due on Thursday on a $2 billion offshore bond and a $47.5 million dollar-bond interest payment due next week. Both bonds would default if Evergrande fails to settle the interest within 30 days of the scheduled payment dates. A company spokesperson did not immediately respond to request for comment on its payment obligation due on Thursday.