Evergrande Real Estate Group said on September 28 that Chinese authorities suspected the group's chairman of being involved in "criminal acts", and the company's shares would be frozen until further information was available.
Trading in shares of Evergrande and two Hong Kong-based subsidiaries was suspended on Thursday, raising concerns about the company’s ability to restructure its massive debt and avoid liquidating its business units.
In a filing to the Hong Kong stock exchange after the market closed, Evergrande said it had been informed by “relevant authorities” that its chairman Hui Ka-yin would be subject to “certain compulsory measures under the law due to suspicions of involvement in criminal acts.”
Evergrande was once China's second largest real estate company. Photo CNN
The company did not provide further details. Under Chinese law, “compulsory measures” can include detention and arrest.
Citing several sources, Bloomberg reported on September 27 that Xu Jiayin, one of China's richest men, was being monitored after being detained earlier this month.
Bloomberg said the billionaire is under home surveillance.
Last Sunday, Evergrande warned that its plans to restructure its overseas debt could face difficulties due to investigations in China. Meetings with corporate creditors have been postponed.
The announcement comes just weeks after reports emerged that Chinese police had launched the first criminal investigation into Evergrande since the group defaulted on its debts two years ago.
Chinese police in Shenzhen said they had detained several employees of Evergrande’s asset management unit after the company failed to pay investors. The unit operates in China’s “invisible banking” sector, promising high interest rates to attract capital and funneling it into real estate projects.
The heavily indebted real estate developer had $328 billion in liabilities as of the end of June 2023. Its stock has been on a tear amid delays to its debt restructuring plan, with Evergrande’s stock down more than 80% since it resumed trading in August after a 17-month delay.
Hengda Real Estate, Evergrande’s flagship unit in China, said in a statement on Monday that it is in discussions with parties to address debt risks, after the unit failed to repay a 4 billion yuan (about $547 million) bond.
Investors breathed a brief sigh of relief last month after Evergrande reported a sharp reduction in losses in the first half of 2023. The company said the gains were due to a “mini-boom” in China’s property market earlier this year that boosted its revenue.
However, recent news has been largely negative, and more and more investors are saying they want to find a way to dissolve the company if it cannot come up with a new plan.
Once China's second-largest real estate company, Evergrande's debt default in 2021 sparked a crisis in China's real estate industry that continues to weigh on the country's economy to this day.
Evergrande has been trying to carry out a government-supervised debt restructuring, unveiled a multibillion-dollar plan to make peace with international creditors and recently filed for bankruptcy protection in the United States.
If this foreign debt restructuring fails, and Evergrande cannot come to a new agreement with its creditors, the company could be liquidated, selling all its assets and ceasing all operations.
Nguyen Quang Minh (according to CNN)
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