China Puts Evergrande’s Billionaire Founder Under Police Control

Bloomberg News
Tue, September 26, 2023 

(Bloomberg) -- Hui Ka Yan, the billionaire chairman of beleaguered property developer China Evergrande Group, has been placed under police control, according to people with knowledge of the matter.

Hui was taken away by Chinese police earlier this month and is being monitored at a designated location, the people said, asking not to be identified because the matter is private.

It’s not clear why Hui is under so-called residential surveillance, a type of police action that falls short of formal detention or arrest and doesn’t mean Hui will be charged with a crime. Still, the measure means he is unable to leave the location, meet or communicate with others without approval, based on China’s Criminal Procedure Law. Passports and identification cards must be handed to police but the process shouldn’t exceed six months, according to the law.

The move is the latest sign that the saga at the world’s most indebted developer has entered a new phase involving the criminal justice system, after authorities earlier this month detained some staff at its wealth management unit and two former executives were also reportedly held. It adds to questions over the fate of Evergrande after setbacks to its restructuring plan in recent days roiled financial markets and raised the risk of a liquidation.

For Hui, who controlled one of the world’s biggest fortunes when Evergrande’s shares peaked in 2017, the development is another blow in a remarkable fall from grace. Once considered among the most politically connected businessmen in China with ambitions ranging from electric cars to soccer, the tycoon has now become the most high-profile casualty of President Xi Jinping’s crackdown on excessive leverage and speculation in the real estate sector.

Guangdong police and Evergrande didn’t respond to requests for comment.

Evergrande sits at the center of a years-long property crisis that has hurt the Chinese economy and hammered confidence in the housing market. On Friday, the developer said it scrapped key creditor meetings and has to revisit its plan to restructure its offshore debt. Since then, it has disclosed it was unable to meet regulatory qualifications to issue new bonds — a key component of the debt overhaul — while its mainland unit failed to repay an onshore bond.

A Bloomberg Intelligence gauge of Chinese developer stocks fell to the lowest since November on Wednesday morning. Homebuyer sentiment remains fragile ahead of a key holiday sales period that will test the effectiveness of stimulus measures rolled out in recent weeks.

The son of a wood cutter who grew up in poverty, Hui built Evergrande into China’s largest developer by using leverage to buy massive tracts of land and scoop up rivals, before branching out into industries ranging from bottled water to professional soccer and electric vehicles.

He was once Asia’s second-richest person, only to see his net worth slump as his property empire crumbled. Hui is now worth about $1.8 billion from $42 billion in 2017, according to the Bloomberg Billionaires Index. Evergrande has 2.39 trillion yuan ($327 billion) in liabilities.

The 64-year-old has been a Communist Party member for more than three decades. In 2008, he was elected to join the Chinese People’s Political Consultative Conference, an elite group comprising government officials and the biggest names in business. He later secured two other five-year terms.

Things took a turn for the worse in 2021, when Evergrande officially became a defaulter and authorities from its home province of Guangdong led what is poised to be one of the nation’s biggest debt restructurings.

Hui had been part of the CPPCC’s elite 300-member standing committee since 2013, but he was told not to attend the annual convention in March last year as his property group became the biggest casualty of the nation’s credit crunch.

China’s central bank has blamed Evergrande’s demise on its “own poor management” and “reckless expansion,” and the government has urged Hui to use his fortune to help repay investors.

©2023 Bloomberg L.P.


China Evergrande has 'no bullets' left as crisis lights up mainland social media about end-game for fallen billionaire Hui Ka-yan

South China Morning Post
Tue, September 26, 2023 

The debacle at China Evergrande Group is heating up some of the nation's social media platforms with discussions about its fate. Some argued the penny stock is worth a punt before another bid to beat the drop. Others said bankruptcy may be inevitable.

The drama took another turn for the worse when the developer's major onshore unit, Hengda Real Estate Group, failed to repay a 4 billion yuan (US$547 million) note on Monday, an obligation among US$327 billion of liabilities choking the homebuilder. It is talking to bondholders about a solution on a "non-evasion of debt" basis.

The unit is already being investigated by regulators for market breaches, a transgression that cripples Evergande's ability to sell and list new bonds in offshore markets under China's capital market rules. Several former executives have been detained over missing funds, local media outlet Caixin Global reported on Monday.

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"Not able to issue new notes means no more financing possibilities, just like no bullets to fight a war," Zhou Si, a user with 810,000 followers on Weibo, said in a post on the short-message platform on Tuesday.

"If it fails to restructure its debt, the only ending for [founder] Hui Ka-yan is bankruptcy," Xiaoma, another commenter, added.

Evergrande did not immediately reply to an email on Tuesday seeking comment. A call to its corporate headquarters in Shenzhen went unanswered.

Its shares fell 8.1 per cent to HK$0.395 on Tuesday, adding to a 22 per cent slump on Monday. The stock has crashed by more than HK$335 billion (US$42.8 billion) since hitting HK$25.80 in July of 2020, a month before Beijing unleashed its industry-crippling "three red lines" policy.

Some social media commenters see a chance to dabble in the stock, albeit with a dose of caution. "Please be cautious when you want to buy in," Xiaoheiyezhijing, a Weibo user with 629,000 followers, said on Monday. "It's okay to buy a little bit. It would be a disaster if you buy a lot."


'Plenty of time on the clock,' says Brock Silvers, managing director at Kaiyuan Capital in Hong Kong. Photo: Handout alt='Plenty of time on the clock,' says Brock Silvers, managing director at Kaiyuan Capital in Hong Kong. 

Brock Silvers, the managing director at Kaiyuan Capital in Hong Kong, is sanguine about the situation. Restriction of new notes would seriously complicate things, but the market does not have the full details behind it while the winding-up petition on October 30 is still a month away.

"Large restructurings are often roller-coaster rides, and all parties, including regulators, want a deal here," he said. "An agreement before the [court] deadline should not be ruled out. Plenty of time on the clock."

What chairman and founder Hui does in the next few days or weeks will determine if the group's US$20 billion debt restructuring proposal with friendly offshore creditors will survive in its current form and terms. Other, hostile, ones are seeking a court order in Hong Kong next month to liquidate the developer.

The restructuring proposal was cobbled together over two years of negotiations with friendly creditors, who stand to lose more than 96 per cent of their money in the worst-case outcome. Several creditor meetings have been scrapped, likely delaying its timeline, while the latest curbs on offshore bond sales, vital in replacing defaulted debt, could be the killer blow.

"Evergrande's difficulties in debt restructuring would be prolonged," said Tan Haojun, a financial columnist and commentator, said in a Weibo post on Tuesday. "Any violation could cause serious problems for a company with such a debt scale. It's more difficult and risky to bring Evergrande back to life."

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.

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Evergrande stocks have tanked 27% this week, suggesting the worst is far from over for China's property sector

Huileng Tan
Tue, September 26, 2023 

China's property market is mired in a crisis.

Costfoto/NurPhoto/Getty Images

Chinese property giant Evergrande's shares have tanked 27% so far this week.

They slumped following a series of bad news over the last few days.

A former Chinese central bank official told Bloomberg that China's property market could take a year to recover.

Recent developments at Chinese property giant Evergrande aren't quite inspiring confidence in China's real estate market.

The company's troubles have been deepening recently, which have torpedoed its share prices.

On Tuesday, Evergrande's shares tanked 7% by midday, extending a slump that took the stock down as much as 25% on Monday. This means Evergrande's share price has plummeted 27% this week.

Evergrande is worth about 5.3 billion Hong Kong dollars, or $678 million, now – a massive fall from grace from the company's heydays in 2017 when it was worth nearly 420 billion Hong Kong dollars.

Evergrande's stock has been hit by a series of bad news in the last few days. They include the cancellation of key creditor meetings this week that were announced on Friday and another notice on Monday that it would be unable to issue new debt.

Late on Monday, Caixin, a Chinese financial news outlet, reported that Chinese authorities detained Pan Darong, a former chief financial official at Evergrande. Authorities also imposed restrictions on Xia Haijun, a former CEO at the property giant.

Evergrande's main domestic unit, Hengda Real Estate Group, also announced late on Monday it failed to make payments on the principal and interest for a 4 billion Chinese yuan, or $547 million, bond due on the same day.

The developments weighed on Evergrande shares, which have been massively volatile since the stock resumed trading on the Hong Kong stock exchange last month following a 17-month suspension since March 2022.

The massive slump in Evergrande shares also suggests that the worst is far from over for China's property sector, wrote Junrong Yep, a market strategist at online trading platform IG, in a Tuesday note seen by Insider.

Investment in property in China fell about 19% in August from a year ago — marking its 18th straight month of decline, according to Reuters calculations based on official data released on September 15.

In fact, the property sales could take as long as a year to recover, Li Daokui, a former People's Bank of China adviser told Bloomberg on Tuesday.

"The property market will come back as an important driver for the economy, however the magnitude of the impact of property as a growth engine will be much smaller," Li told Bloomberg.
A real estate crisis has loomed over China since 2021

Evergrande — once China's second-largest developer — faced a liquidity crisis in 2021 that triggered broader concerns about the country's real-estate sector. The sector, along with related industries, contributes as much as 30% to the country's GDP.

Evergrande had over $300 billion worth of liabilities by the end of 2022. The company filed for bankruptcy protection in the US on August 17.

China is trying to revive its property sector by stimulating consumer demand, but consumers are unlikely to be clamoring for new apartments amid record-high youth unemployment rate and slower economic growth, experts told Insider.

In fact, there are way too many empty homes in China. A former top China official said there could be enough vacant homes in China to house up to 3 billion people — which is nearly 10 times the population of the US.

China Evergrande shares on the Hong Kong Exchange were 7% lower 40 Hong Kong cents at midday on Tuesday.

Evergrande and former People's Bank of China adviser Li did not immediately respond to requests for comment from Insider.


Evergrande was just the beginning. China's property sector is in trouble.

Joel Mathis
Tue, September 26, 2023

Unfinished buildings at China Evergrande Group's Health Valley development on the outskirts of Nanjing, China.

China’s long-running property sector crisis is somehow getting worse. CNN reported that Evergrande, the giant developer whose 2021 default set off the crisis, is unable to complete its debt restructuring plan thanks to an investigation into one of its subsidiaries. The result of that announcement? On Monday, Evergrande’s stock plunged 21% in Hong Kong stock trading — “dragging down the stocks of other Chinese property developers” and deepening an economic mess that has shaken China’s already fragile economy.

Evergrande and companies like it were “once a booming industry and a key driver of the country's economic growth,” Reuters reported. But Evergrande isn’t the only Chinese developer struggling with a huge debt load: Country Garden Holdings, which has 108.7 billion yuan (more than $14 billion in U.S. dollars) in bond repayments due over the next year, has also signaled that it is at risk of default. The compounding crises could “delay the prospect of a recovery of both the property market and the broader Chinese economy.”

Indeed, Bloomberg argued, the latest headlines from China’s property sector have “undercut Xi Jinping’s push” to end the economic malaise overtaking his country. Xi’s government has taken “measures to prop up housing demand” — including loosening of mortgage restrictions — in the hopes of keeping the industry afloat, but “China’s aging population and an oversupply of housing” may mean there’s only so much officials can do.

'Companies have pulled back'

The problems of big developers are hurting the little guys in China, The New York Times reported. “Small businesses and workers are owed hundreds of billions of dollars” for completed work, and new development projects are no longer in the pipeline. That has rippled through the rest of the economy. “Companies have pulled back on hiring. Fewer and fewer people are buying homes.”

Will China’s problems spread to the West? Maybe not. “The reality is that the world is now a little less exposed to China than it used to be even a few years ago,” Cornell University’s Eswar Prasad said in an interview with The New Yorker. A Chinese stock market crash might not have a “huge negative effect” on American stocks. It’s true that “commodity-exporting countries, oil-exporting countries” might be hurt by the faltering Chinese economy, but “U.S. exports to China are limited” which means that Americans should mostly avoid “the dampening effect” of the property crisis.

The effects aren’t just economic. Business Insider pointed out that President Biden believes the property crisis reduces the possibility of a China-U.S. conflict over Taiwan. "He has his hands full right now," Biden said of Xi earlier this month. Xi’s efforts to spur his country’s economy are faltering, and some observers fear that means China might ratchet up its designs on Taiwan. Biden disagrees. "I don't think it's going to cause China to invade Taiwan,” Biden said. “Matter of fact the opposite, [the country] probably doesn't have the same capacity as it had before.”

'A decade's work in front of us'

The struggle continues.

South China Morning Post reported that Moody’s Investors Service has downgraded its analysis of the country’s property sector from “stable” to “negative.” That news “only increases the likelihood of more forceful and broad-based policy support” from Xi’s government in the coming months. But that stimulus will probably only stabilize the sector, not revive it. “A major stimulus-fueled rebound in China’s housing market is highly unlikely.”

So how long will it take to pull out of the crisis? Possibly a long time. “Fixing the property sector may be a multi-year or even a decade’s work in front of us,” economist Hao Hong told CNBC. One of the obstacles: The Chinese housing market is already vastly overbuilt — there are more homes and apartments available than people to fill them. “There is now an oversupply of real estate ... 1.4 billion people may not be able to live in them,” a former official said recently. Even with loosened mortgage rules, Chinese homebuyers probably won’t be able to save their country’s economy.

China Evergrande shares tumble for second day after unit misses bond payment
Reuters
Mon, September 25, 2023 

FILE PHOTO: Headquarters of China Evergrande Group in Shenzhen

HONG KONG (Reuters) - China Evergrande Group shares slid for a second consecutive session on Tuesday, dropping as much as 8% after a unit of the embattled property developer missed an onshore bond repayment.

Evergrande's main domestic unit, Hengda Real Estate Group, said in a Shenzhen stock exchange filing late on Monday it had failed to pay the principal and interest for a 4 billion yuan ($547 million) bond that was due by Sept. 25.

The news comes after Evergrande said on the weekend that it was unable to issue new debt due to an ongoing investigation into Hengda, sending Evergrande's share price plunging 22% on Monday.

Hengda said it will actively negotiate with bondholders in a bid to reach a solution as soon as possible while working to resolve the debt risks and to safeguard creditors' rights and interests.

The missed payment is the latest setback to hit Evergrande, which has lurched from one crisis to another since its financial woes became public in 2021 and it defaulted on its offshore debt obligations later that year.

Evergrande has been seeking creditors' approval for its proposals to restructure offshore debt worth $31.7 billion that includes bonds, collateral, and repurchase obligations.

Under the plan unveiled in March this year, Evergrande proposed various options to offshore creditors, including swapping some of their debt holdings into new notes with maturities of 10 to 12 years.

($1 = 7.3102 yuan)

(Reporting by Donny Kwok; Editing by Sumeet Chatterjee and Edwina Gibbs)

Major Evergrande creditor group to seek liquidation if no new debt plan soon -sources

Scott Murdoch
Updated Tue, September 26, 2023

 Buildings developed by China Evergrande Group on the man-made Ocean Flower Island in Danzhou

SYDNEY (Reuters) - A major group of offshore creditors of China Evergrande Group is planning to join a court petition to liquidate the cash-strapped developer if it doesn't submit a new debt revamp plan by next month, two sources familiar with the matter said.

The creditor group holds a large portion of Evergrande offshore bonds and, if it decides to join, would add more weight to the petition filed against the developer by an investor in a Hong Kong court.

Evergrande's offshore debt restructuring plan, unveiled in March, has been thrown into uncertainty after the developer said on Sunday it was unable to issue new debt due to an ongoing regulatory investigation into its main unit in China.

Deepening turmoil in China's debt-laden property sector is threatening to undermine Beijing's efforts to get the sputtering economy back on more solid footing, and raising fears among investors of a spillover into the country's banking system.

Evergrande has been in the process of seeking creditors' approval for its proposals to restructure offshore debt worth $31.7 billion, which includes bonds, collateral, and repurchase obligations.

Under the plan, Evergrande, the poster child of China's property sector crisis, had proposed various options to offshore creditors, including swapping some of their debt holdings into new bonds with maturities of 10 to 12 years.

A group of Evergrande bondholders were surprised by the firm's weekend announcement which said it was unable to issue new notes, and have been seeking meetings with the developer to seek more information, said the two sources.

If Evergrande fails to submit a new debt restructuring plan by Oct. 30, that bondholders' group will support a winding-up petition -- or petition to liquidate -- already filed against the developer, said the sources, declining to be identified due to the sensitivity of the matter.

The group has been in favour of finding a restructuring resolution for Evergrande's debt, but the developer's weekend announcement has reduced hopes that would eventually happen, the sources added.

Top Shine Global, an investor in Evergrande unit Fangchebao, in June 2022 filed a petition to liquidate in Hong Kong because it said the developer had not honoured an agreement to repurchase shares the investor bought in the unit.

In July, the hearing for that winding-up petition against Evergrande was adjourned to Oct. 30, in order to wait for the result from the developer's meeting with creditors to vote on its debt restructuring plan.

Evergrande needs approval from more than 75% of the holders of each debt class to approve the plan.

That meeting is scheduled for mid-October. However, the latest disclosure by Evergrande puts the meeting, as well as its outcome, in doubt and it's not clear if the meeting with offshore creditors will go ahead as planned.

Evergrande did not immediately respond to Reuters request for comment.

MISSED PAYMENT

The liquidation petition against Evergrande is one of the many such proceedings launched against Chinese developers as the firms failed to meet debt payment obligations after an unprecedented liquidity crunch hit the sector in 2021.

Evergrande cited an analysis commissioned from consultancy Deloitte during a Hong Kong court hearing in July to say the recovery rate from its proposed debt restructuring plan would be around 22.5%, compared with 3.4% if the developer is liquidated.

"At this stage, the offshore creditors are getting desperate, knowing none or little would be left for them," said KT Capital Group senior researcher Fern Wang, who publishes on Smartkarma.

The liquidity crunch was triggered in part by government efforts to clamp down on high debt levels in the property sector and rein in speculation.

Many of the defaulted developers have been scrambling to get their offshore creditors' approval for debt restructuring plans to avoid collapse or being forced into liquidation proceedings.

Shares in Evergrande ended down 8.1% on Tuesday at their lowest level since Sept. 6, extending losses for the second consecutive day, after its main domestic unit said it missed an onshore bond repayment.

The unit, Hengda Real Estate Group, said in a Shenzhen stock exchange filing late on Monday that it had failed to pay the principal and interest for a 4 billion yuan ($547 million) bond due by Sept. 25.

Evergrande's stock plunged 22% on Monday, after its Sunday announcement about its inability to issue new notes.

The latest developments further darken the outlook for Evergrande, which has lurched from one crisis to another since its financial woes became public in 2021 and it defaulted on its offshore debt obligations later that year.

These setbacks also come as the Chinese authorities have been trying to revive homebuyers' sentiment with a raft of measures, including a reduction in existing mortgage rates.

(Reporting by Scott Murdoch; aditional reporting by Donny Kwok in Hong Kong; Editing by Sumeet Chatterjee, Kim Coghill and Mark Potter)

China's property stocks fall by the most in nine months as Evergrande says it's unable to issue new debt

Joseph Wilkins
Mon, September 25, 2023 

Qi Yang/Getty Images; mikroman6/Getty Images

China's embattled property stocks have tanked by the most in nine months, according to Bloomberg data.

The Bloomberg Intelligence gauge of Chinese developer shares fell almost 7% after Monday's trading.

Major developer Evergrande fell by 25% after announcing it was unable to issue new debt.

China's property stocks have tanked by the most in nine months as the embattled industry struggles to cope with a slew of headwinds.

The Bloomberg Intelligence gauge of developer shares fell almost 7% after Monday's trading – having now shed over $55 billion from its value this year, per the outlet.

Among the biggest losers was embattled developer Evergrande – which is reeling from its abrupt cancellation of key creditor meetings and its announcement that it would be unable to issue any new debt.

Shares in the struggling developer – once China's second-largest — tanked 25% on Monday, continuing its wild price swings since the stock resumed trading on the Hong Kong stock exchange last month.

After facing a liquidity crisis in 2021, the firm's woes are symptomatic of the broader issues facing the sector.

Evergrande had around $300 billion worth of liabilities when troubles first began and this figure ballooned to about $340 billion by the end of 2022.

The real-estate crisis in the Asian nation shows little sign of easing, with policymakers in Beijing holding back from extending large-scale policy support for the industry. As many as 53 Chinese developers have collapsed in recent years as the once-booming market faces slowing demand and enormous debt burden repayments.

China is trying to revive the ailing industry by boosting consumer demand in other parts of the economy, but appetites for apartments is likely to remain subdued amid record-high youth unemployment rate and slower economic growth, experts told Insider.

Evergrande shares slide again after missed payment

Reuters Videos
Tue, September 26, 2023 


STORY: Evergrande shares tumbled for a second day on Tuesday (September 26).

They fell as much as 8% in Hong Kong trade, following news of more debt troubles.

Its main domestic unit - Hengda Real Estate - said it had failed to make payments due the day before.

That came after Evergrande said over the weekend that it was unable to issue new debt.

The firm says that’s due to an ongoing investigation into Hengda by regulators.

Evergrande shares lost more than a fifth of their value on Monday (September 25) following that news.

Now the company says it will negotiate with bondholders to find a solution to the missed payment.

But it’s all just the latest setback for Evergrande, which has lurched from one crisis to another since its financial woes became public in 2021.

The firm has been seeking creditors’ approval to restructure offshore debts totalling almost $32 billion.

It needs approval from 75% of the holders of each type of debt to approve the plan.

The turmoil in the property sector has investors at home and abroad feeling nervous, with real estate accounting for around a quarter of China’s economy.