Evergrande chair breaks silence to rule out fire sale of assets

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Shares of Evergrande rose after its chairman ruled out fire asset sales and pledged to complete half of its remaining projects over the rest of the year, as the developer in the world was struggling to deliver units to homebuyers.

Hui Ka Yan said in comments reported by state media that the developer would deliver 600,000 units in 2022, months after the company stalled hundreds of projects during a crisis that engulfed China’s property sector.

The company’s shares rose 3% in afternoon trading in Hong Kong, after falling nearly 90% in the past 12 months. The broader Hang Seng China Enterprises index of Hong Kong-listed Chinese companies rose 0.3%.

Evergrande began missing bond payments in September and defaulted on debt late last year as it entered the biggest restructuring process in China’s history.

The group, with more than $300 billion in liabilities, has become a test case for the vast borrowing that underpins China’s property sector, which for decades has anchored the country’s economic growth. Last year, the sector entered a severe downturn after President Xi Jinping’s government introduced reforms to limit leverage.

Hui’s rare comments, which were made at a company meeting over the weekend, followed scrutiny of his wealth, including luxury properties in Hong Kong where Evergrande is listed.

The developer and the government have prioritized the completion of hundreds of property projects on the mainland, where buyers often buy apartments before they are built.

Last year, US investor Oaktree Capital took control of an Evergrande project near Shanghai and appointed receivers for another development it lent against in Hong Kong last month.

Bondholders in international markets, from which Evergrande has borrowed about $20 billion, have complained about the company’s lack of commitment and warned of possible legal action. They have been closely monitoring its offshore assets, including shares of its electric vehicle and property management subsidiaries in Hong Kong, for signs of a fire sale.

The crisis spread to the wider Chinese offshore high yield market, where yields rose to levels not seen during the financial crisis. The prices of once-safe developer bonds fell.

Shimao, a previously investment-grade developer, continued rapid asset sales to raise funds ahead of debt maturities this year.

Dealogic, the data firm, said this week that issuance in the Asian high-yield market, excluding Japan, fell to a six-year low due to turmoil in China’s property sector. Issuers raised just $4 billion in January, down from $19 billion in the same period a year earlier.

Additional reporting by Edward White in Seoul

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