China Audits Evergrande To Discern If It Deserves Bailout

Chinese authorities are auditing the assets of embattled real estate developer China Evergrande and its billionaire founder, Hui Ka Yan, Huileng Tan reported for Business Insider.

Photo Insert: The fate of embattled Evergrande now lies in the hands of state auditors.

The audit aims to determine the value of the assets and uncover any hidden assets, according to Reuters, citing two sources with direct knowledge of the matter. The exercise will also enable authorities to decide if Evergrande would require a bailout that involves state-owned entities.

Last week, Hui was forced to sell 277.8 million pledged Evergrande shares after an unnamed third party enforced a "security interest" in them. He still owns about 60% of the company and is worth about $6 billion, according to the Bloomberg Billionaires Index.

China's government has stepped in to oversee Evergrande's debt crisis after the real estate giant announced earlier this month that there was "no guarantee" it would have enough funds to meet debt repayments.

Shenzhen-headquartered Evergrande is the world's most indebted property developer, with $300 billion in liabilities. Investors are scrutinizing its every move as they fear its collapse could have a domino effect on China's economy — possibly sending the rest of the world into a financial crisis.

Fitch Ratings has already cut its rating on the company last week and said it considered the property giant to be in default after two subsidiaries missed coupon payments.

Regulators have sought to assure the market that Evergrande's troubles are ring-fenced and managed — but the Chinese government has also signaled there will be no outright bailout for the real estate giant. The market is now expecting a long-drawn restructuring mirroring high-profile meltdowns Beijing has handled in the past.

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