China tells states to be ready for Evergrande's possible collapse

Authorities ask embattled developer to avoid near-term default on bonds

Chinese authorities are asking local governments to prepare for the potential downfall of debt-ridden China Evergrande Group, the Wall Street Journal reported on Thursday, citing officials familiar with the discussions.

The move has been characterised as “getting ready for the possible storm” by the officials, according to the report. The officials said local-level government agencies and state-owned enterprises have been instructed to step in only at the last minute should Evergrande fail to manage its affairs in an orderly fashion, the WSJ reported.

Local governments have been tasked with preventing unrest and mitigating the ripple effect on home buyers and the broader economy, the officials said, according to the report.

Evergrande, China's second-biggest property developer, has $83.5 million in dollar-bond interest payments due on Thursday on a $2 billion offshore bond and a $47.5 million dollar-bond interest payment due next week.

Both bonds would default if Evergrande fails to settle the interest within 30 days of the scheduled payment dates.

Meanwhile, financial regulators in Beijing issued a broad set of instructions to China Evergrande Group, telling the embattled developer to focus on completing unfinished properties and repaying individual investors while avoiding a near-term default on dollar bonds.

In a recent meeting with Evergrande representatives, regulators said the company should communicate proactively with bondholders to avoid a default but didn’t give more specific guidance, a person familiar with the matter said. The developer has an $83.5 million coupon due Thursday, with a 30-day grace period to make the payment.

There’s no indication that regulators offered financial support to Evergrande for the bond payment, and it’s unclear whether officials believe the company should eventually impose losses on offshore creditors. Policy makers are trying to learn more about who holds Evergrande’s bonds, the person said, asking not to be identified discussing sensitive information.

Some offshore bondholders don't expect payment by Thursday deadline

Some of China Evergrande Group's offshore bondholders are not expecting the firm to make an interest payment by a Thursday deadline, a person familiar with the matter said, as worries about the fate of the property developer mount.

The company has yet to make an announcement about its plans for the offshore bond payment obligation. A spokesperson for Evergrande did not immediately respond to a request for comment.

EV unit stops paying staff, factory suppliers 

Evergrande Group’s electric-car unit has missed salary payments to some of its employees and has fallen behind on paying a number of suppliers for factory equipment, according to people familiar with the matter, evidence the stricken property developer’s debt woes are having an impact beyond its core business.