This article is from the Australian Property Journal archive
BILLIONAIRE chairman of Chinese development giant Evergrande, Hui Ka Yan has been placed under police surveillance, as the world’s most indebted developer teeters on the brink of collapse.
The news comes as restructuring of Evergrande, which has US$327 billion in debts, begins to falter, and the company misses another bond payment.
Bloomberg is reporting that Hui Ka Yan is “being monitored at a designated location” after being taken away by Chinese police earlier this month.
Anonymous sources suggested that he is unable to leave his residence or communicate with others without approval, and he must surrender his passport and identification card.
Under Chinese law, surveillance of this nature cannot last more than six months, is not considered a formal detention or arrest and does not necessarily mean charges of a crime will be laid.
Evergrande did not respond to requests for comment.
In a surprise development, Evergrande said in a Sunday statement to the Hong Kong Stock Exchange that it cannot issue new debts to restructure its offshore liabilities due to an ongoing investigation into its domestic subsidiary, Hengda Real Estate Group, over alleged disclosure violations, while it also scrapped a key creditor meeting at the 11th hour.
Hengda Real Estate missed principal and interest payments on Monday on an onshore four billion yuan (US$547 million) bond, the company said.
Evergrande’s legal woes are deepening. Police in Shenzhen, in southern China, had just arrested several employees within Evergrande’s wealth management business, which had issued about $5.6 billion worths of wealth management products that had been bought by investors and average Evergrande employees.
Former Evergrande CEO Xia Haijun and CFO Pan Darong have also been detained by police.
A hearing for a petition to wind up the property giant is scheduled for 30th October in Hong Kong, and Reuters has reported that a major offshore creditor group was planning to join the petition if it does not submit a new debt revamp plan by the end of next month.
Evergrande first defaulted on its debt in 2021 and China’s gargantuan property sector – which once accounted for 30% of the country’s gross domestic product – has been reeling since, filtering through to the broader economy. Countless homes have been left unfinished, leaving Beijing worried about social unrest as homebuyers refuse to make mortgage payments, and developers buckle under huge debts. Another major Chinese development company, Country Garden has warned of a potential US$7.6 billion first-half loss and is itself in danger of default. Creditors last week gave it a temporary reprieve, approving an extension on repayments for a set of bonds.
Evergrande shares resumed trading after a 17-month hiatus late last month, but its stock price was down 22% on Monday and 7% on Tuesday on the latest news.
Evergrande said in recent days “The sales of the Group has not been as expected by the company” since its March debt restructuring announcement, and that it “considers it necessary to reassess the terms of the proposed restructuring to meet the company’s objective situation and the demand of the creditors”.
