Evergrande to let angry investors, staff bid on deeply discounted properties

In an effort to steer investors away from cash repayments, the company is pushing steep discounts on property assets. PHOTO: AFP

SHENZHEN (BLOOMBERG) - China Evergrande Group plans to let consumers and staff bid on discounted properties this month to repay them for billions in overdue investment products as the embattled developer seeks to preserve cash, according to people familiar with the matter.

The company will organise an online property event by Sept 30 for investors who opt for discounted real estate in lieu of cash, said two employees who were briefed on an internal call on Thursday (Sept 16) and asked not to be identified. Evergrande did not respond to a request for comment on the plan.

The world's most-indebted property developer is pushing the discounted real estate as the preferred of three options for angry investors seeking repayments. The high-yield products paying as much as 13 per cent a year have become a lightning rod for cash-strapped Evergrande, with investors and staff protesting losses and delayed payments from investments that were marketed as safe. Demonstrations that are breaking out across China could sway any bailout decisions by the government, which places a high priority on social stability.

More than 70,000 people bought the products, including many Evergrande employees, Bloomberg reported earlier, citing an executive of Evergrande's wealth division. About 40 billion yuan (S$8.3 billion) of them are now due, Caixin reported.

In an effort to steer investors away from cash repayments, the company is pushing steep discounts on property assets. Investors can invest in residential housing units at a 28 per cent discount, offices at a 46 per cent discount and stores and parking units at 52 per cent. Discounted rates cannot be lower than price floors designated by local governments. The property discounts are a voluntary repayment option, according to the briefing.

The details of the new plan, which was first floated on Monday, appear to favor large holders. Investors can get one token to bid on their ideal property for every 500,000 yuan invested, according to the people briefed. The more tokens, the better the chances of grabbing a preferred unit, the people were told.

Under the cash option, investors can choose to be repaid 10 per cent of their principal and interest every quarter, meaning they would be fully repaid in two and a half years, Bloomberg reported earlier. Investors in the products can also opt for payment discounts on residential units they have already purchased, according to the revised plan unveiled Monday.

Evergrande has also settled repayment with some corporate partners by offering its properties.

Shenzhen World Union Group, which sells new homes for the developer, said on Friday it has agreed with Evergrande on using properties to offset a fifth of unpaid dues as at Aug 31.

Skshu Paint, one of Evergrande's paint contractors, agreed early this month to receive three unfinished projects, which are scheduled to be completed as late as 2024. It has started to cash out some of these units by selling them, it said earlier.

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