Shares in China's biggest property developer surged almost 20 percent Wednesday after it reached an agreement with key investors that helps it avoid a cash crunch that some fear could hit the global financial system.

The future of China Evergrande Group has been thrown into doubt as it struggles to cover repayments on debts totalling more than $120 billion, with a letter last week circulating on Chinese social media appearing to show it asking the government in Guangdong for help.

The company, the world's most indebted developer, refuted the claims on Thursday, saying they were "fabricated" and "pure defamation", adding it would take legal action.

Its shares plunged by a fifth in Hong Kong, while its Shanghai-listed stock was suspended and ratings group S&P downgraded its credit outlook to "negative".

Analysts have warned that a default on huge debts owed by the company, founded by billionaire Xu Jiayin and a key player in China's building boom, could send bad loans cascading through the country's opaque banking system.

But the firm moved to stabilise its affairs on Tuesday after key investors agreed not to sell 86.3 billion yuan ($12.6 billion) in Hengda Real Estate, an Evergrande unit.

The company had raised billions of dollars by selling stakes in the unit and pledged to repay the cash if it did not float by January.

There had been fears they would push to get their money but the developer said in a statement the investors "will continue to hold their interests in Hengda Real Estate, with their percentage of equity interests remaining unchanged".

Tuesday's deal, which also starts the process of shoring up a further 28 billion yuan of shareholdings, buys some time for the developer to sort out its debt repayments.

Evergrande shares jumped 19.4 percent in Hong Kong on Wednesday. That followed a more than 20 percent jump Monday after the firm sought to reassure investors about its future.

"The agreement solves the core issue of Evergrande, which is liquidity concern," Raymond Cheng, a property analyst at CGS-CIMB Securities, said.

Wednesday's rally was also helped by news Evergrande had filed to spin off its property services business in Hong Kong, helping to raise much-needed cash.

According to Bloomberg, the developer owes $88 billion to banks and other lenders inside China and has borrowed a further $35 billion from bondholders around the world.

And while the latest deal will buy the company some time, Bloomberg Intelligence analysts Kristy Hung and Patrick Wong warned that it was not out of the woods yet.

"Evergrande faces the task of restoring the con?dence of buyers and lenders, and still risks liquidity woes despite investors tossing it a ?nancial life jacket," they said.

-- Bloomberg News contributed to this story --

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