China Evergrande tycoon Hui Ka Yan hears sobering message from regulator on debts

China Evergrande (3333) shares fell by 1 percent after it was reported that founder Hui Ka Yan was asked by the Chinese regulators to solve the bad debt last month, Bloomberg reports.

When China Evergrande Group founder Hui Ka Yan appeared at the Communist Party’s 100th anniversary celebration in Tiananmen Square on July 1, investors cheered at the implication that the embattled property tycoon still enjoyed favor in Beijing.

Behind the scenes, the message Hui received from China’s top financial regulator was far more sobering. In a meeting in Beijing shortly before the July 1 festivities, officials at the Financial Stability and Development Committee urged Hui to solve his company’s debt problems as quickly as possible, people familiar with the matter said.

The previously unreported discussion suggests Chinese authorities have become increasingly concerned that Evergrande poses systemic risks to the world’s second-largest economy.

It adds pressure on Hui to deliver a more decisive fix to Evergrande’s finances, which have come under growing strain in recent weeks as the company’s bonds and shares tumble.

FSDC officials asked Hui to consider bringing in strategic investors to stabilize the property giant, emphasizing the need to avoid major shocks to the economy, one of the people said.

Hui told the officials he’s been speaking with local governments as he looks for a solution, another person said, asking not to be identified discussing sensitive information.

It’s the latest twist in a financial drama that has turned Evergrande into a subject of intense speculation on trading desks from Hong Kong to New York.

While the world’s most indebted real estate company has been offloading assets and accelerating property sales to reduce leverage, it has so far failed to revive confidence among creditors, suppliers and some homebuyers who worry the company will struggle to make good on its US$302 billion mountain of liabilities.

Evergrande’s shares have tumbled more than 36 percent this year to a four-year low, and its longer-dated offshore bonds are trading at about 61 US cents on the dollar. The share fell by 1 percent to HK$9.52, as of 03:33 pm.