Evergrande Chairman Placed under Police Surveillance, Raises More Doubts About Developer’s Future
HONG KONG (Reuters) – Hui Ka Yan, the chairman of China Evergrande Group, has been placed under police surveillance, according to Bloomberg News, further adding to concerns about the embattled developer’s future as it grapples with the increasing prospects of liquidation.
Sources familiar with the matter revealed that Hui, who founded Evergrande in 1996, was taken away by police earlier this month and is currently being monitored at a designated location. It remains unclear why Hui has been placed under residential surveillance, with Bloomberg News noting that this is a type of police action short of formal detention or arrest, and it does not imply that Hui will be charged with a crime.
Reuter’s attempts to verify the report were unsuccessful, as Evergrande, the police department in Guangdong province, and the public security ministry did not immediately respond to requests for comment.
Evergrande, known as the world’s most indebted property developer, has been at the center of a liquidity crisis in China’s property sector. As the top-selling developer in China, its financial crisis became public in 2021, and it has since defaulted on offshore debt obligations along with several other industry peers.
The reported surveillance of Hui comes as Evergrande’s offshore debt restructuring plan, critical to its survival amidst a crippling cash crunch, appears to be on the verge of failure. This has increased the likelihood of the company being liquidated.
On Tuesday, Reuters reported that a major Evergrande offshore creditor group intends to join a liquidation court petition against the developer if it fails to submit a new debt revamp plan by the end of October.
This development follows Evergrande’s announcement on Sunday that it would not be able to issue new bonds as part of its debt restructuring plan due to a regulatory investigation into its main Chinese unit, Hengda Real Estate. Hengda itself failed to pay the principal and interest on a 4 billion yuan ($547 million) bond by the September 25 deadline.
Shares in Evergrande rose 1.3% in afternoon trade in the Hong Kong market on Wednesday, while an index tracking Hong Kong-listed mainland developers remained largely unchanged.
Meanwhile, another major Chinese developer, Country Garden, is facing a bond coupon repayment deadline on Wednesday. The $40 million coupon is tied to a $1 billion bond set to mature in January. Country Garden has been working to avoid default and is expected to delay the coupon payment while utilizing the grace period to devise plans to restructure all of its offshore debt.
Fiona Kwok, Asian Fixed Income portfolio manager at First Sentier Investors said, “The fall of industry stalwarts in China’s property space has been alarming…Until Chinese regulators come through with stimulus significant enough to inject optimism into the property market and increase property sales, default risk remains high among private and mixed ownership developers.”
(By Scott Murdoch in Sydney and Rae Wee in Singapore; Writing by Sumeet Chatterjee; Editing by Neil Fullick and Muralikumar Anantharaman)