Evergrande says its Chairman is under investigation for “crimes”

Beijing [China], September 29 : Embattled Chinese developer Evergrande Group said on Thursday that Chinese authorities suspected its chairman of “crimes”, adding that the shares in the company would remain suspended until further notice, CNN reported.
Earlier in the day, trading in the shares of Evergrande and two subsidiaries was halted in Hong Kong, stoking fears about its ability to restructure its mammoth debt and stave off a liquidation of the business.
In a filing to the Hong Kong Stock Exchange issued after the market closed, Evergrande said it had been notified by the “relevant authorities” that its chairman Hui Ka Yan had been subject to “mandatory measures in accordance with the law due to suspicion of…crimes.” The developer firm gave no further details.
Under the Chinese legal system “mandatory” or “compulsory” measures can include detention and formal arrest, according to CNN.
Evergrande had warned on Sunday that its offshore debt restructuring plan may be in trouble because of a regulatory probe into its main subsidiary in mainland China. Meetings with creditors were postponed.
The announcements came just weeks after news emerged that Chinese police had launched their first criminal probe into Evergrande since it defaulted on its debt nearly two years ago.
Chinese police in Shenzhen said they had detained some staff at Evergrande’s wealth management unit after it failed to repay investors. The unit operates in China’s “shadow banking” sector, raising funds on the promise of high returns and funnelling them into real estate projects, CNN reported.
The world’s most indebted real estate developer had total liabilities worth USD 328 billion at the end of June. Its stock had been plunging all week as the attempts to restructure its debts were put on hold. The stock has now fallen more than 80 per cent since it resumed trading in August after a 17-month suspension.
Hengda Real Estate, Evergrande’s flagship unit in mainland China, said in a statement on Monday that it was still working with all parties to resolve the debt risks after it missed payments on a 4 billion yuan (USD 547 million) bond.
Meanwhile, the investors breathed a small sigh of relief last month, when Evergrande reported a significant narrowing in its losses for the first half of the year. That was thanks to a rise in revenue because of a “short boom” in China’s property market earlier this year, CNN reported citing the company.
However, the news since has been relentlessly negative, and a growing number of investors are reportedly seeking to wind up the company if it is unable to come up with a new survival plan soon.
Previously, China’s second biggest real estate company, Evergrande’s default in 2021 ignited a crisis in the property sector that continues to weigh on the wider economy, CNN reported.
Evergrande has been trying to implement a government-supervised debt restructuring. It unveiled a multi-billion-dollar plan to make peace with its international creditors and recently filed for bankruptcy protection in the United States as part of the process.
If the offshore debt restructuring fails, and Evergrande is unable to reach a new deal with its creditors, it could face liquidation, where its assets are sold and it stops all operations, according to CNN.