Friday, October 22, 2021

Evergrande bosses face ‘severe punishment’ after getting early refunds

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Evergrande Real Estate Group Ltd updates

Six top Evergrande executives face “severe punishment” for securing early repayments on investment products that the indebted Chinese real estate group later told retail investors it could not pay on time, the company said.

The admission comes ahead of a critical fortnight for the developer, which is struggling to reimburse investors, banks and bondholders, as well as full flats for home buyers who paid for their new properties in advance.

Last week, hundreds of retail investors protested at Evergrande’s headquarters in the southern city of Shenzhen, after executives said they needed more time to pay interest and principal on high-yield wealth management products issued by the group. They were joined by providers who said they hadn’t been paid either.

Du Liang, a senior executive at the company, told investors that Evergrande had used at least 40 billion rupees ($ 6.2 billion) from wealth management sales to fund construction projects across the country, according to people who participated. in the deal negotiations. In addition to the money Evergrande has borrowed from 80,000 retail investors, the group owes other creditors and suppliers an estimated $ 300 billion.

In a statement over the weekend, Evergrande said that as of May 1, more than 40 group executives had purchased its investment products. Six of them, who had obtained early repayments of their investments, will return the money.

“All funds redeemed by managers must be returned and severe penalties will be imposed,” said the company, which has also offered to reimburse investors with discounted flats and parking.

It is common for owners and employees of heavily indebted Chinese companies to purchase such products to help finance operations. Ding Yumei, wife of Evergrande founder and president Hui Ka Yan, paid Rs 20 million for group investment products in July.

Evergrande’s attempts to quell investor ire highlight the many challenges its debt crisis poses for the Chinese government, which is reluctant to bail out the company even though its collapse could have far-reaching consequences.

Some Evergrande bonds have recently traded for as low as 20 cents on the dollar, while yields on the debt of other Chinese real estate groups have risen sharply.

Two Evergrande executives, who asked not to be named, told the Financial Times that the group’s operations could be taken over by local governments and large state-owned developers “region by region” but added that such a complicated bailout would be a “last resource”.

“Banks must extend our loans,” said one of the executives. “If they stop working with us, we will die immediately. How is it [the government] I’m going to deal with so many unfinished [property] projects and handle so many retail investors? “

The value of Evergrande’s Hong Kong-listed shares has fallen nearly 90 percent over the past year.

The Chinese government recently organized a rescue of Huarong, a heavily indebted state-owned asset manager, by other government-controlled banks and asset managers. But she is reluctant to do the same with a large private sector company like Evergrande.

Earlier this year, HNA Group, an aviation and tourism conglomerate, filed for bankruptcy proceedings in its home province of Hainan. Although it was apparently a private sector group, HNA was eventually controlled by the Hainan provincial government, tasked with overseeing its reorganization by Beijing.

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