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HONG KONG – The chief executive of Evergrande Group is in talks with investment banks and creditors in Hong Kong over a possible restructuring and asset sale, two people said, as the Chinese developer battles against default on more than $300 billion in debt. Is.

CEO Xia Haijun, a confidant of chairman Hui Ka Yan and who runs Evergrande’s day-to-day operations, including financing, has been in Hong Kong, where the property firm has a major presence, for more than two months, two sources told Reuters. told .

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A third source said Xia had been talking to banks and creditors in Hong Kong, but did not say what was being discussed.

Evergreen creditors fear imminent default as area of ​​concern

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Shenzhen-headquartered Evergrande, which is grappling with more than $300 billion in liabilities, has left its offshore investors in the dark about repayment plans as it is already missing three rounds of interest payments on its dollar bonds.

Xia’s interactions with investment banks and creditors in Hong Kong have not been previously reported.

One of the sources said that Zia needs to communicate with foreign banks on loan extension and repayment. The source declined to disclose the identities of the creditors Zia spoke to in recent days.

“Zia also needs to find out how many off-balance sheet loans the group has, as many were underwritten at subsidiary levels and they themselves were not aware of it,” he added. “Before that they can’t work on the restructuring and talk to the bondholders.”

Evergrande has been scrambling to sell some of its assets to raise cash – efforts that have yet to see much success – as concerns have emerged in recent weeks about a possible collapse and the impact on global markets and China’s economy. have grown.

Chinese state-owned Yuxiu Properties has pulled out of a proposed $1.7 billion deal to buy Evergrande’s Hong Kong headquarters building over concerns about the developer’s dire financial situation, Reuters reported on Friday.

Beyond Evergrande, China’s property market faces a $5 trillion reckoning

A Chinese central bank official said on Friday that the spillover effect of Evergrande’s credit problems on the banking system was controllable and the risk exposure to individual financial institutions was not large.

Evergrande and Xia did not respond to Reuters requests for comment.

Sources with direct knowledge of the development declined to be named due to the sensitivity of the matter.

public appearance

Evergrande’s chairman Hui hasn’t appeared publicly in recent weeks or announced plans to address the group’s woes, leading investors to wonder whether they should expect the 30-day grace period to expire this month. But the unpaid bond coupon will incur a loss.

Last month, the developer issued a statement saying that Hui had urged company executives to ensure quality delivery of assets and redemption of wealth management products.

Xia, who is also a vice chairman of the board, joined the company in 2007 and is responsible for Evergrande’s capital operations and management, as well as legal affairs and foreign affairs, according to the company’s website.

According to one of the sources, he has been in Hong Kong since July. Another source said that Xia was meeting with Chinese investment banks in the city to explore potential asset sales.

Evergrande, once China’s best-selling developer, has said it wants to dispose of a stake in assets, including its services and electric vehicle units, to raise funds.

The developer is finalizing details to sell 51% of its Evergrande property services unit to Hopson Development for HK$20 billion ($2.57 billion).

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Investment bank Moelis & Co and law firm Kirkland & Ellis, representing bondholders who currently hold $5 billion in Evergrande nominal offshore bonds, called for more information and transparency from Evergrande last week.

The developer said last month it had appointed Houlihan Loki and Admiralty Harbor Capital as joint financial advisors to examine its financial options after it warned of default risks amid declining asset sales.

($1 = 7.7792 Hong Kong Dollar)