HONG KONG — The chairman of China Evergrande Group has been placed under police surveillance, Bloomberg News reported on Wednesday, raising more doubts about the embattled developer’s future as it grapples with the mounting threat of liquidation.
Citing people with knowledge of the matter, the report said Hui Ka Yan, who founded Evergrande in 1996 in the southern city of Guangzhou, was taken away by police earlier this month and is being monitored at a designated location.
Evergrande is the world’s most indebted developer with more than $300 billion in total liabilities and has been at the center of an unprecedented liquidity crisis in China’s property sector, which accounts for roughly a quarter of the economy.
It was not clear why Hui was placed under residential surveillance, Bloomberg News said, adding the move was a type of police action that falls short of formal detention or arrest and does not mean Hui will be charged with a crime.
Reuters could not immediately verify the report. Evergrande, the police department in Guangdong province, whose capital is Guangzhou, and the public security ministry did not immediately respond to requests for comment.
A person close to Evergrande said Hui had stopped contacting staff over the past few days, while an industry source said he had become totally inaccessible. Both of them declined to be identified as they were not authorized to speak to the media.
The reported action against Hui comes after police in southern China said earlier this month that they have detained some staff at Evergrande’s wealth management unit, which raised funds from individual investors by selling investment products.
Once China’s top-selling developer, Evergrande’s financial crisis became public in 2021 and since then it and a string of its peers have defaulted on their offshore debt obligations amid slowing home sales and fewer new avenues for fundraising.
Adding to its woes, Evergrande’s offshore debt restructuring plan, the key to its survival amid a stifling cash crunch, looks set to falter and the prospects of the firm being liquidated are gathering momentum.
The company is “very likely to fail on debt restructuring, and with negative equity, Evergrande may go into bankruptcy, which includes bankruptcy reorganization and bankruptcy liquidation,” UOB Kay Hian wrote in a note on Wednesday.
As the developer’s already sold but unfinished apartments will pose a risk to “social stability,” there is a good chance that Evergrande will likely seek bankruptcy reorganization, the brokerage said.
Reuters reported on Tuesday that a major Evergrande offshore creditor group was planning to join a liquidation court petition filed against the developer if it does not submit a new debt revamp plan by the end of October.
That plan comes after the company rattled markets on Sunday with its announcement that it could not issue new bonds as part of its debt restructuring plan because of a regulatory investigation into its main Chinese unit, Hengda Real Estate.
Hengda, in a separate filing on Monday, said that it had failed to pay the principal and interest on a $547 million bond due by a Sept. 25 deadline.
Shares in Evergrande ended down 19% on Wednesday, while an index tracking Hong Kong-listed mainland developers fell 0.2%.
Source : VOA News