Just days after Fitch Ratings downgraded its credit assessment of China Evergrande Group to ‘Restricted Default’, Chinese state media is reporting Guangdong provincial government officials have moved in on the property developer’s Shenzhen headquarters.
The state media report, released early morning on Wednesday (U.S. EST), states the officials are part of a “working team” deployed to “study the company’s financial condition and help with risk disposal”, while Evergrande management has been told to report directly to the officials.
The working team is understood to also be collecting information about Evergrande executives’ guarantees for the company’s debts and scrutinising the personal finances of Chairman, Hui Ka Yan.
EV boss now in charge
Evergrande’s vice president and auto business chief, Xiao En is believed to now be in charge of China Evergrande’s daily operations.
This is in line with a statement by Hui Ka Yan made in October. The Chairman said that the debt-ridden property developer would make manufacturing electric vehicles its top priority within the next decade.
Last month, Evergrande’s EV subsidiary, China Evergrande New Energy Vehicle (HKG: 0708) announced it was planning to raise up to $350 million from a share placement to fund production and strengthen its financial position.
Government bailout?
Industry insiders have today speculated that the Guangdong provincial working group could be a step towards the nationalization of Evergrande, something that many have expected would occur, as the Chinese Government seeks to boost investor sentiment ahead of the Chinese Communist Party’s 20th National Congress in 2022, as well as protect Chinese property buyers.
Such an intervention would come as it looks increasing likely that a major bondholder will initiate bankruptcy proceedings against the company.
Evergrande has a total of $255.2 million worth of USD bond coupon payments due on December 28. Last week, 30-day grace periods for two unpaid US$40m bond coupons expired without payment from Evergrande.
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