Global Courant
Concerns that Evergrande Group will go bankrupt have increased following news that the developer’s chairman, Hui Ka-yan, is under police surveillance.
Hui was taken by Chinese police earlier this month and is being monitored at a designated location, Bloomberg reportedwith reference to people familiar with the situation.
According to the report, the billionaire is under residential surveillance, but this does not mean he will be charged with a crime.
With offshore creditor meetings originally scheduled for Monday and Tuesday canceled, Evergrande must submit a new debt restructuring plan by Oct. 30 or the bondholder group will back a liquidation petition already filed against the developer, according to Reuters. reported on Tuesday.
Evergrande shares have lost 42% so far this week. Shares of Country Garden and Sunac, which followed in Evergrande’s footsteps by filing for bankruptcy protection in the United States, fell 14.3% and 20.5% respectively.
Bankruptcy protection is a preparatory step that gives the debtor time to draw up a restructuring plan and obtain creditors’ approval. A complete bankruptcy would mean that the company would be liquidated.
Some commentators say that not only is it likely that the once largest property developer will go bankrupt, but also that its collapse will damage homebuyer confidence and cause instability in financial systems.
Since announcing a debt restructuring plan on March 22, sales have been worse than expected, the company said in a press release submit to the Hong Kong Stock Exchange on September 22.
Based on the current situation and consultation with its advisors and creditors, the company believes it is necessary to reassess the terms of the proposed restructuring plan.
Evergrande said On Sunday, the company announced that it is unable to meet the requirements for issuing new notes under the current circumstances as its Shenzhen-listed subsidiary Hengda Real Estate Group is under investigation.
Suspicions
Hengda Real Estate had even already done that said on August 16, it was announced that it was being investigated by the Chinese Securities Regulatory Commission (CSRC) for suspected violations of information disclosure rules.
It was on August 17 that Evergrande archived for bankruptcy protection in Manhattan Bankruptcy Court, requesting recognition of ongoing restructuring discussions in Hong Kong, the Cayman Islands and the British Virgin Islands.
Zhang Yinyin, a Shanghai-based columnist, noted that date. writes in an article that when Evergrande said on August 16 that Hengda Real Estate was under investigation, it already knew the proposed debt restructuring plan would fail.
“There is no point in blaming ‘worse-than-expected sales’ for the cancellation of the foreign creditors meeting,” said Zhang. “It would be strange for a developer with debt to have strong sales.”
Zhang says it would be very difficult to restructure Evergrande’s debt even if there were no investigation into Evergrande’s subsidiaries and executives – which has 2.4 trillion yuan ($329 billion) in debt – and the need to raise another $200 to $300 billion. yuan.
Yang Shih-kuang, a Taiwanese commentator, said A TV program on Monday noted that Beijing’s recent move to curb capital outflows has also become a new obstacle for Evergrande to pay its foreign creditors and implement its debt restructuring plan.
Yang said that from Beijing’s perspective, the main mission of indebted real estate developers is to ensure the supply of apartments to home buyers.
Citing three sources, Reuters reported On September 11, the PBoC announced that the PBoC is tightening its supervision of bulk purchases of dollars by domestic companies amid a weakening renminbi. Companies now need central bank approval to purchase as little as $50 million.
Last year, Evergrande Delivered 300,000 apartments, about half of the target, to its customers. In the first half of this year, 120,000 apartments were completed. According to media reports, the company is still obliged to deliver an additional 400,000 apartments to its buyers.
Last Saturday a social media after about Hui’s arrest went viral on the Internet. It said Hui was handcuffed for resisting arrest.
Ran Xiongfei, a veteran football reporter who is believed to be familiar with the situation, said people should not trust or spread the rumor but wait for an official announcement. Some other commentators said it was unlikely that a 64-year-old billionaire would resist arrest.
Chen Panpan, a Beijing-based writer, say that if Hui faces fines, it will likely be due to the inability of Evergrande’s asset management unit to repay its investors.
“When Evergrande’s asset management division fell into arrears in September 2021, Hui Ka-yan promised that his investors would be paid,” Chen said. “But due to Evergrande’s deteriorating financial situation, the asset management company had changed its payment plans several times.”
On August 31 this year, Evergrande’s asset management unit said it was unable to make payments for investment products this month due to a liquidity crisis. On September 16, the unit’s personnel were arrested by police in Shenzhen. The police called on the public to provide information about the case.
A writer from Hubei say Evergrande’s potential bankruptcy will not only damage homebuyer confidence, but also cause losses for the developer’s creditors, such as banks, investors and suppliers, and shake the financial systems. He says regulators must take effective measures to prevent a financial crisis and boost market confidence.
Read: Evergrande debt case hits Chinese stock markets
Follow Jeff Pao on Twitter at @jeffpao3
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