the arrest of the president of the real estate company Evergrande, the “victim” of Xi Jinping and the collapse of its shares

the arrest of the president of the real estate company Evergrande, the “victim” of Xi Jinping and the collapse of its shares

2023-09-27 23:00:03

The president of the indebted Chinese real estate company Evergrande, Hui Ka-yan, is under police house arrestcausing the company to close with losses of 18.98% on the Hong Kong Stock Exchange, where it is listed.

According to anonymous sources cited by Bloomberg, the 64-year-old businessman is “under surveillance” in a “designated” location.

Although it is not a formal detention or arrest, the authorities They seek to prevent Hui, founder of the promoter, from leaving the country or meet with other people without prior authorization, the media adds.

The shares of Evergrande, which filed for bankruptcy in the US in August and this week announced that it cannot issue new debt after repeatedly postponing its restructuring meetings, They plummeted by 18.98% on the Hong Kong Stock Exchange, generating even more doubts among analysts, who believe that the company could soon enter the liquidation process.

According to Bloomberg, the magnate, who went on to amass one of the largest fortunes in the world when Evergrande shares reached their peak in 2017, has become “the most prominent victim” of Chinese President Xi Jinpingin his campaign against speculation in the real estate sector.

The media points out that Hui, a member of the Communist Party of China (CCP) for three decades, now has a net worth of 1.8 billion dollars compared to 42 billion in 2017, while Evergrande, the most indebted real estate developer in the world, accumulates a liability of 327,000 million dollars.

Officials from the People’s Bank of China (central) blamed Evergrande’s problems in 2021 on “mismanagement” and to its “reckless expansion”and urged Hui himself to use his fortune to get out of debt.

The group, founded in 1996, accumulated debts to finance its real estate projects and its expansion into other sectors such as health services, electric vehicles or even sports.

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However, the drop in the value of new home sales and the real estate sector regulations that Beijing imposed in 2020 to combat speculation They put the company in trouble.

On Sunday, Evergrande announced that it cannot meet the requirements for the issuance of new debt securities at this time, as its subsidiary Hengda Real Estate Group is under investigation by the China Securities Regulatory Commission.

The president of China’s Evergrande Group, Hui Ka-yan, in Hong Kong, in 2017. Photo Reuters

The announcement came just days after the company said it had postponed its restructuring meetings of debt for the third time.

At the end of last December and in the hope of controlling the increase in housing prices, new regulations were approved that limited loans to large real estate developers, some of which such as Evergrande They already accumulated large debts.

The real estate sector, one of the pillars of Chinese economic growth in recent decades, represents 7.5% of the country’s gross domestic product, according to the National Bureau of Statistics of China.

Chronology of the crisis of the most indebted real estate company in the world

– August 2021: Many of Evergrande’s projects in China are paralyzed due to maturing debts, leading the Central Bank and financial authorities to warn the company that it must reduce risks and prioritize stability.

– September 2021: Alarm bells begin to ring when Evergrande, with a debt of $305 billion, defaults on international debt interest. The company begins to suffer strong fluctuations on the Hong Kong stock market, where it is listed, and even suspends trading in its securities for two weeks.

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– November 2021: The president of the firm, Hui Ka-yan, sells 1,200 million of its shares for a value of 342.7 million dollars (304 million euros), reducing its participation from 77 to 67.9% in search of liquidity to face the company’s debts.

Evergrande buildings under demolition order, on the Ocean Flower artificial island in Danzhou, Hainan province. Reuters Photo

– December 2021: Evergrande shares plummet to their all-time low after the company announced the possibility of not being able to meet all of its debt and that it would negotiate a restructuring plan with its offshore creditors.

– March 2022: Evergrande suspends its stock market listing again and justifies the decision by its inability to present audited results before March 31 of that year.

– November 2022: China Construction Bank, one of Evergrande’s creditors, requisitions a Hui mansion in a prestigious area of ​​Hong Kong.

– January 2023: The consulting firm PriceWaterhouseCoopers (PwC) is declining to continue auditing the indebted real estate giant, considering that it had not received sufficient information on some key issues to evaluate the company’s accounts for the 2021 financial year.

– March 2023: Evergrande presents a plan to restructure part of its extraterritorial (‘offshore’) debt, proposing to holders of this type of bonds several options, from new debt securities with the same value to “equity-linked instruments” that can be converted into shares of its real estate management or electric vehicle subsidiaries.

– April 2023: The indebted real estate giant announces agreements with offshore bondholders and ensures that 77% of class A debt holders and 30% of class C debt holders have presented their support for the restructuring proposal.

July 2023: The company announces attributable net losses of 476,035 million yuan (65,109 million dollars, 61,782 million euros) in 2021 and 105,914 million yuan (14,486 million dollars, 13,746 million euros) in 2022. In 2020, Evergrande had gained 8.076 billion yuan.

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August 2023: Evergrande requests the protection of US bankruptcy law to address its serious financial situation and avoid the seizure of its assets. The company files for Chapter 15 of the US bankruptcy code, which allows foreign companies that are in the process of restructuring to suspend payments on their international debts in the United States.

– August 2023: The conglomerate announces losses of 33,012 million yuan (4,515 million dollars, 4,283 million euros) in the first half of the year, 50.4% less than in the same period of 2022.

August 2023: The Chinese group’s shares lose 79% after reactivating their listing on the Hong Kong Stock Exchange, suspended since March 2022. Evergrande had already lost more than 90% of its stock market value when it suspended trading in its shares.

– September, 17th: The Police of the city of Shenzhen (southeast) report the arrest of an undetermined number of employees of a financial subsidiary of Evergrande. Shortly after, the company postpones its debt restructuring meetings for the third time.

– 24th September: Evergrande announces that it cannot meet the requirements for the issuance of new debt securities, as its subsidiary Hengda Real Estate Group is being investigated by the China Securities Market Regulatory Commission. Its shares plummet again on the stock market.

-September 27th: Bloomberg reports that Hui is under police house arrest, causing the company to close again with heavy losses on the Hong Kong Stock Exchange.

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