October 03, 2023:On Wednesday, the director of China Evergrande Group came under police surveillance, raising concerns about the troubled developer’s future as it grapples with increasing prospects of liquidation.
According to individuals familiar with the matter, Hui Ka Yan, the founder of Evergrande in 1996 in Guangzhou, was taken into police custody earlier this month and is currently under monitoring at a designated location.
As per Bloomberg News, the reason for placing Hui under residential surveillance remains unclear, and this action does not imply formal detention or criminal charges.
Reuters has not independently confirmed this report, and Evergrande and the relevant authorities have not yet responded to Reuters’ request for comments. Evergrande, the world’s most indebted property developer, has been at the epicenter of an unprecedented liquidity crisis in China’s property sector, which accounts for approximately a quarter of the world’s second-largest economy.
Once the top-selling developer in China, Evergrande’s financial crisis became public in 2021, leading to defaults on offshore debt obligations by Evergrande and several of its peers. The reported surveillance of Hui coincides with the uncertain fate of its offshore debt restructuring plan, a critical factor in its survival amid a severe cash shortage. This plan faces challenges, and the possibility of liquidation is becoming more likely.
This situation follows Evergrande’s recent announcement that it cannot issue new bonds as part of its debt restructuring plan due to a regulatory investigation into its central Chinese unit, Hengda Real Estate.
Hengda, in a separate statement, acknowledged its failure to meet a September 25 deadline for repaying the principal and interest on a 4-billion-yuan ($547 million) bond. Despite these developments, Evergrande’s shares in the Hong Kong market were up 1.3% on Wednesday, while an index tracking Hong Kong-listed mainland developers remained largely unchanged from its previous close.