Report: Troubled Chinese builder promises 600,000 apartments

A newspaper says a Chinese real estate developer that is struggling under $310 billion in debt is promising to deliver 600,000 apartments this year

China Troubled Developer (Copyright 2021 The Associated Press. All rights reserved.)

A Chinese real estate developer that is struggling under $310 billion in debt is promising to deliver 600,000 apartments this year, a newspaper reported Thursday, in a show of confidence it can avert collapse and resume normal business.

Evergrande Group has left financial markets guessing at its status since the developer warned in December it might run out of cash. Its struggle to avoid default alarmed investors, but Chinese officials say any financial impact can be contained.

Xu Jiayin, the Evergrande founder, announced the plans to deliver apartments at a Feb. 6 meeting with employees, the Securities Times reported. It said the company aims for monthly sales of 10 billion yuan ($1.6 billion) to make sure construction can be completed.

The report suggested Evergrande aims to carry on normal business, contrary to expectations among investors the company might be broken up or shut down.

The target of 600,000 apartments is comparable to deliveries in one of Evergrande’s busiest past years, the newspaper said.

Evergrande and some smaller developers are scrambling to comply with tighter limits on borrowing imposed in 2020 to rein in surging debt the ruling Communist Party worries is dangerously high.

Evergrande says it has 2.3 trillion yuan ($350 billion) in assets, but the company has struggled to turn that into cash to pay bondholders and other creditors.

The company had “almost no capital inflow” since September, Xu said. He previously has said potential buyers were put off by news reports about its financial struggle.

However, Xu ruled out a “fire sale” of assets at reduced prices, according to the Securities Times.

Evergrande has missed deadlines to pay interest on some bonds but made payments before a grace period expired and it was declared in default. Some bondholders can agree to be paid by receiving apartments.

Economists say Beijing’s priority is to ensure families receive apartments they already have paid for while avoiding a bailout that would send the wrong signal to companies that are under pressure to cut debt.

The government of Evergrande’s home province of Guangdong adjacent to Hong Kong sent officials to its headquarters in December to oversee risk management. Other provinces and cities have sent officials to local Evergrande operations.