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China debt crunch

Chinese authorities summon Evergrande chairman, send in risk managers

Troubled property group looks to restructure offshore debt in talks with creditors

 China Evergrande said there was no guarantee that it would have enough funds to meet its financial obligations.   © Reuters

SHANGHAI -- Local Chinese authorities have announced they would send a team of risk managers to China Evergrande Group as the troubled property giant said it intended to work with creditors on a plan for restructuring its offshore debt.

Officials from Guangdong Province summoned Evergrande Chairman Hui Ka Yan late Friday. Authorities agreed with debt-laden Evergrande's request to send a working group to the company. The team will reportedly help bolster risk management and internal controls.

The dispatch of Guangdong officials suggests the provincial government will now play a key role in overhauling the property group, whose $300 billion in liabilities have raised fears of a collapse that would send a shockwave through China's financial system.

The talks with authorities came after Evergrande said in filing Friday that it had received a demand to perform an obligation tied to a guarantee of $260 million. The company said it many not have enough funds "to continue to perform its financial obligations."

The People's Bank of China, the central bank, also said it is working with the Guangdong government, together with relevant agencies, to resolve the Evergrande situation.

Evergrande Chairman Hui Ka Yan has been summoned by the Guangdong local government.    © Reuters

If Evergrande is unable to fulfill its financial responsibilities, it may lead to creditors demanding "accelerated repayment," the group said in the filing. The obligation in question is dollar-denominated, privately placed debt, Chinese media report.

Evergrande could be considered in default if it fails to make payment.

The group is "upholding the principles of fairness and legality, and plans to actively engage with offshore creditors to formulate a viable restructuring plan of the company's offshore indebtedness for the benefit of all stakeholders," said Evergrande.

No further details were provided, but it is assumed that Evergrande will ask for an extension on repaying the offshore debt, or a payment reduction. But foreign creditors are likely to demand the same repayment terms granted to Chinese creditors, so talks could prove difficult.

"We believe that administrative offices both domestic and foreign will handle matters in a fair and equitable manner in accordance with the law," said a spokesperson from the China Banking and Insurance Regulatory Commission

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