According to Bloomberg News, the chairman of China Evergrande Group, Hui Ka Yan, has been placed under police surveillance. This development raises further concerns about the future of the troubled developer as it faces the possibility of liquidation. Hui, who founded Evergrande in 1996, was taken away by police earlier this month and is currently being monitored at a designated location.
Evergrande is currently the most indebted property developer in the world and is at the center of a liquidity crisis in China’s property sector. This sector accounts for a significant portion of the country’s economy. The reasons behind Hui’s placement under residential surveillance are unclear, but it is important to note that this action does not imply formal detention or arrest, nor does it mean that Hui will be charged with a crime.
RushHourDaily was unable to immediately verify the report, and requests for comment from Evergrande, the police department in Guangdong province, and the public security ministry went unanswered. However, sources close to Evergrande have stated that Hui has stopped contacting staff in recent days and has become inaccessible.
This action against Hui follows the detention of some staff members at Evergrande’s wealth management unit earlier this month. Evergrande’s financial crisis became public in 2021, leading to defaults on offshore debt obligations by the company and its peers. The company’s offshore debt restructuring plan, which is crucial for its survival, is now in jeopardy, increasing the likelihood of liquidation.
UOB Kay Hian, a brokerage firm, stated that Evergrande is very likely to fail on debt restructuring and may go into bankruptcy. The firm’s already sold but unfinished apartments pose a risk to social stability, making bankruptcy reorganization a probable outcome.
A major Evergrande offshore creditor group is planning to join a liquidation court petition against the developer if a new debt revamp plan is not submitted by the end of October. Evergrande’s announcement that it could not issue new bonds due to a regulatory investigation into its main Chinese unit, Hengda Real Estate, has further shaken the markets. Hengda itself failed to pay the principal and interest on a bond due by September 25.
As a result of these developments, Evergrande’s shares plummeted in Hong Kong trading, and an index tracking Hong Kong-listed mainland developers also experienced a decline. The company’s rapid growth through a land-buying spree and low-margin apartment sales has come under scrutiny as its liabilities have ballooned to over $300 billion.
Investors are also concerned about problems at another major Chinese developer, Country Garden, which is facing a bond coupon repayment deadline. The $40 million coupon is tied to a $1 billion bond that matures in January. Country Garden is expected to delay the payment and use the grace period to restructure its offshore debt.
The fall of industry stalwarts in China’s property sector has raised alarm among investors. Until Chinese regulators implement significant stimulus measures to boost the property market and increase sales, the risk of default remains high for private and mixed ownership developers.
In conclusion, the chairman of China Evergrande Group, Hui Ka Yan, has been placed under police surveillance, adding to the uncertainties surrounding the embattled developer’s future. Evergrande’s financial crisis and mounting debt have led to defaults and the possibility of liquidation. The company’s offshore debt restructuring plan is in jeopardy, and its shares have experienced a significant decline. Additionally, concerns have arisen regarding another major Chinese developer, Country Garden. The challenges faced by these companies highlight the risks in China’s property sector.
