China Considers Asset Spin-off and Sale of Evergrande Group

[Photo by EPA Yonhap News]

[Asia Economy Reporter Park Byung-hee] Bloomberg reported on the 27th (local time) that the Chinese government is considering a plan to separate and sell Evergrande Group, which is causing risks of economic slowdown due to the real estate crisis.

According to sources, Chinese authorities are reviewing a restructuring proposal from the Guangdong provincial government to separate and sell Evergrande Group's assets.

The Guangdong government proposed selling most assets except for Evergrande Group's listed real estate operation division and electric vehicle division. The proceeds from the asset sales will be used to repay Evergrande Group's debts. In this process, banks and creditors holding Evergrande bonds may be forced by authorities to accept debt restructuring (haircuts). However, for overseas investors, a trustee account will be established to protect them, according to the sources.

The restructuring plan proposed by the Guangdong government also includes transferring Evergrande Group's unsold real estate assets to China Xinda Asset Management, a Chinese state-owned distressed asset management company and a major creditor of Evergrande Group.

Another source stated that although the real estate operation division and electric vehicle division are currently excluded from the sale, they may become sale targets in the future depending on the results of the asset sales. The market value of Evergrande Group's real estate operation division and electric vehicle division combined is estimated at about $9 billion.