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By Clare Jim and Brenda Goh
HONG KONG/SHANGHAI (Reuters) -The provincial government leading China Evergrande Group's restructuring wants to separate the company's offshore assets and sell them to pay off foreign debt, a media report said on Friday, in a boost to foreign lenders' hopes of recouping funds.
Financial intelligence provider REDD said on Friday the provincial government in Guangdong, where Evergrande is based, aimed to release a framework debt restructuring plan by March that could also wipe out the 60% stake of the group's chairman.
Citing two sources briefed on the matter, REDD said the provincial government was proposing that state-led investors should buy Evergrande <3333,HK> assets and that proceeds from the sale of foreign assets should be used to pay offshore debt.
While investors have been expecting state-led organisations to help smooth the restructuring, some have been concerned that Beijing would use proceeds from any asset sales to prioritise paying off onshore debt.
The provincial government has finalised the framework document and submitted it to China's cabinet for discussions late this week, REDD said, adding a detailed restructuring proposal would be released by October.
The provincial government, cabinet and Evergrande did not respond to requests for comment outside regular business hours.
Evergrande is the world's most-indebted property company with more than $300 billion in liabilities, including nearly $20 billion of international bonds all deemed to be in default after a run of missed payments late last year.
Evergrande's April 2023 U.S. dollar bond jumped to 17.762 cents on the dollar after the REDD report, data by Duration Finance showed, up from 12.227 overnight. Its shares closed down 0.6%, before the report was published.
The REDD report also said Evergrande Chairman Hui Ka Yan's 59.78% stake in the company could be wiped out after completion of the restructuring because the developer is "significantly insolvent."
Earlier on Friday, the developer said in a filing it was hiring more financial and legal advisers - China International Capital Corp Ltd, BOCI Asia Ltd and Zhong Lun Law Firm - to follow up with demands from creditors.
That came a day after an offshore creditor group, represented by law firm Kirkland & Ellis and investment bank Moelis, said it was ready to take "enforcement actions" to defend members' rights after what it said was Evergrande's lack of engagement.
Evergrande has asked offshore bondholders to disclose holdings, according to a letter seen by Reuters on Friday. The developer is seeking replies by mid-next week to identify investors for communications, to aid debt restructuring.