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Evergrande chair breaks silence to rule out asset fire sale

Evergrande’s shares rose after its chair ruled out asset fire sales and pledged to complete half of its remaining projects over the rest of the year, as the world’s most indebted developer battled 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 work on hundreds of the company’s projects stalled during a crisis that has engulfed China’s property sector.

The company’s shares were 3 per cent higher in afternoon trading in Hong Kong, having fallen almost 90 per cent over the past 12 months. The broader Hang Seng China Enterprises index of Chinese companies listed in Hong Kong was up 0.3 per cent.

Evergrande first began missing bond payments in September and defaulted on its debts at the end of last year as it entered the biggest restructuring process in China’s history.

The group, with more than $ 300bn in liabilities, has become a test case for the vast borrowings underpinning China’s real estate sector, which has for decades anchored the country’s economic growth. Last year, the sector entered a severe slowdown after President Xi Jinping’s government introduced reforms to limit leverage.

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The rare comments from Hui, which were made at a company meeting over the weekend, followed intense 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 real estate projects on the mainland, where homebuyers often purchase flats before they are built.

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

Bondholders in international markets, in which Evergrande has borrowed about $ 20bn, have complained about a lack of commitment from the company and warned about potential legal action. They have closely watched its offshore assets, including equities of its electric vehicle and property management subsidiaries in Hong Kong, for signs of a fire sale.

The crisis has spread through the wider offshore Chinese high-yield market, where yields have risen to levels last seen during the financial crisis. Bond prices of developers once viewed as safe have plummeted.

Shimao, a developer that previously held an investment-grade rating, has pursued rapid asset sales to raise cash ahead of debt deadlines this year.

Dealogic, the data firm, said this week that issuance in the Asian high-yield market, excluding Japan, has fallen to its lowest level in six years because of the turbulence in the Chinese property sector. Issuers raised just $ 4bn in January, compared to $ 19bn in the same period a year earlier.

Additional reporting by Edward White in Seoul

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