According to sources cited by Bloomberg on September 27, Evergrande Group Chairman Xu Jiayin was taken away by the police at the beginning of this month and is currently under surveillance at a designated location. On the afternoon of the same day, sources close to Evergrande also confirmed the news to a media outlet. It is reported that the incident happened a few days ago, and Xu Jiayin is currently in a residence in Beijing, where his freedom of movement has been partially restricted.
“He won’t even hold meetings anymore.” On the afternoon of September 27, a source revealed to a reporter from China Times that he could not confirm the news that “Xu Jiayin’s freedom of movement has been partially restricted.” However, it is certain that Xu Jiayin did not appear at the group’s recent two meetings. According to the source, Xu Jiayin’s last public statement was on September 13. At that time, he spoke in a group, urging various regions to urge the resolution of the project sales restriction issue.
Public information shows that since September, several senior management personnel of Evergrande have been controlled by the police. According to reports, Evergrande Group’s former CEO Xia Haijun and former Chief Financial Officer Pan Darong have been detained by the Chinese authorities, but Evergrande stated to reporters that they “do not know.”
Affected by multiple negative news, Evergrande’s listed platforms, which stabilized their stock prices in early September, have recently started a new round of stock price declines. As of the close of trading on September 27, China Evergrande, Evergrande Auto, and Evergrande Property continued to fall. Among them, China Evergrande closed at HK$0.320 per share, down 18.99%; Evergrande Property closed at HK$0.590 per share, down 14.49%; and Evergrande Auto closed at HK$0.560 per share, down 20.00%.
Multiple Senior Executives of Evergrande Controlled
According to sources cited by Bloomberg on September 27, Evergrande Group Chairman Xu Jiayin was taken away by the police at the beginning of this month and is currently under surveillance at a designated location. The report stated that this action by the police does not constitute formal detention or arrest, nor does it mean that Xu Jiayin will be charged with a crime, and the reason for his residential surveillance is also unclear.
On the same day, Observer.com reported that sources close to Evergrande confirmed the news and stated that the incident happened a few days ago, and Xu Jiayin is currently in a residence in Beijing, where his freedom of movement has been partially restricted.
On the afternoon of September 27, a source revealed to China Times that he could not confirm the news that his freedom of movement had been partially restricted.
However, “he won’t even hold meetings anymore.” The source emphasized that it is certain that Xu Jiayin did not appear at the group’s recent two meetings. According to his understanding, Xu Jiayin’s last public statement was on September 13. At that time, he spoke in a group, urging various regions to urge the resolution of the project sales restriction issue.
Recently, news about Evergrande executives being taken away has been frequently reported. A few days before Xu Jiayin was reported to have his freedom of movement restricted, media reported that Evergrande’s former CEO Xia Haijun and former CFO Pan Darong had previously been taken away by the police. However, on September 26, Evergrande stated to reporters that they “did not know” about this news.
In addition to the above rumors, on the evening of September 16, the Nanshan Branch of the Shenzhen Municipal Public Security Bureau issued a notice that the public security organs have taken criminal coercive measures against Du, who is suspected of committing a crime, and others from Evergrande Wealth. According to media reports, Du is “Du Liang,” the legal representative and general manager of Evergrande Wealth. At the end of August, Evergrande Wealth admitted that it could no longer make payments. As of December 31, 2022, Evergrande Wealth had not paid a total of approximately 34 billion yuan in principal and interest.
Subsequently, Zhu Jialin, the vice chairman of Zhongrong Life Insurance Co., Ltd., was placed under investigation on September 17. Public information shows that Zhu Jialin began serving as the company’s vice chairman in February 2022 and previously served as the chairman of Evergrande Life Insurance Co., Ltd. Some believe that Zhu Jialin’s investigation may be related to Evergrande and may be implicated in the Evergrande Wealth case.
In addition, at the beginning of this year, there were reports that Ke Peng, the former executive president of Evergrande Group, was taken away by the police for investigation, possibly due to matters related to Evergrande’s Shenzhen urban renewal. The reporter learned that this was the second time Ke Peng was investigated. Before this, he was taken away for investigation when he resigned in July 2022. However, at Evergrande’s daily meeting on January 6, Xu Jiayin clarified that Ke Peng was taken away for “personal reasons.” According to reports, due to the Ke Peng incident, Hong Daju and Liu Shixiong, the relevant responsible persons of Evergrande Real Estate Shenzhen Company, were also taken away for investigation by relevant departments at the end of 2022.
Restructuring of Overseas Debt Changes
The news that Xu Jiayin’s freedom of movement has been restricted and that multiple senior executives have been controlled has pushed China Evergrande, which was already deeply mired in the quagmire, even deeper.
According to the semi-annual performance report released by China Evergrande, as of June 30, 2023, the group had land reserves of 190 million square meters; in the first half of 2023, the group achieved contract sales of 33.413 billion yuan, contract sales area of 5.115 million square meters, and cumulative sales revenue of 27.1 billion yuan in the first half of the year.
In terms of financial data, in the first half of 2023, China Evergrande’s revenue was 128.18 billion yuan, with an operating loss of 17.38 billion yuan, non-operating losses (including lawsuits, land being recovered, equity disposal, and asset impairment, and other losses) of 15.03 billion yuan, and a net loss of 39.25 billion yuan. As of the end of July 2023, Evergrande Real Estate’s overdue debts totaled approximately 277.501 billion yuan; in addition, as of the end of July 2023, Evergrande Real Estate’s overdue commercial paper totaled approximately 207.5 billion yuan.
It is worth mentioning that Evergrande’s bonds have defaulted again. On September 25, Evergrande Real Estate Group Co., Ltd. (the main subsidiary of China Evergrande, referred to as “Evergrande Real Estate”) announced that Evergrande Real Estate Group Co., Ltd.’s 2020 public offering of corporate bonds to professional investors (first phase) (bond abbreviation 20 Evergrande 04; bond code: 149247.SZ) should pay the principal and related interest of the bond’s put option on September 25, 2023 (September 23 is a non-trading day, postponed to the first trading day thereafter). As of September 25, 2023, Evergrande Real Estate was unable to pay the principal and interest of the above bonds as agreed.
In response, Evergrande Real Estate stated that it will still take “not escaping debt” as the basic premise and actively negotiate with bondholders in the hope of reaching a solution recognized by the holders as soon as possible, and jointly resolve debt risks and protect the legitimate rights and interests of creditors in accordance with the law through the efforts of all parties.
At the same time, the much-watched Evergrande’s overseas debt restructuring is also facing many obstacles.
Comprehensive information shows that on March 22 of this year, China Evergrande issued an announcement announcing that it had signed the main terms of the restructuring plan with a group of overseas creditors: Evergrande will issue mandatory exchangeable bonds to replace the original bonds; the new bonds have a term of 4 to 12 years, with an annual interest rate of 2% to 7.5%; no interest will be paid in the first three years, and interest and 0.5% of the principal will be paid from the beginning of the fourth year. Afterwards, China Evergrande has repeatedly stated that “most of the debtors have supported the aforementioned restructuring plan.”
However, after the restructuring plan was announced, the formal creditors’ meetings were repeatedly postponed: on July 26, China Evergrande announced that the Evergrande agreement arrangement would be held on August 23, the Tianji agreement, and the Jingcheng agreement arrangement on August 22; on August 16, China Evergrande postponed the above meetings for the first time to August 28; on August 28, China Evergrande announced that the meetings would be postponed to September 25 and September 26, respectively.
Until September 22, China Evergrande announced that since March 22 of this year, the sales performance of Evergrande Group has been worse than expected. Based on the company’s current situation and its consultations with its advisors and creditors, the relevant agreement arrangements meetings for the proposed restructuring originally scheduled for September 25 and September 26 will not be held.
Two days later, on the evening of September 24, China Evergrande announced that in view of the fact that Evergrande Real Estate Group Co., Ltd. is being investigated, China Evergrande’s current situation cannot meet the issuance qualifications of the new notes.
On September 25, IPG China’s chief economist Bai Wenxi told a reporter from China Times that being investigated may have a negative impact on the company’s market reputation and corporate image, making the efforts of China Evergrande, which is already in a difficult situation, to resume operations and debt restructuring even more difficult and more difficult to promote, which will lead to greater resistance to the company’s sales and liquidation, and the financing and maneuvering to serve “guaranteed delivery of buildings” will also be more difficult. “Although there is still uncertainty about the specific content and results of the investigation, the impact on the company’s restructuring and business operations is also self-evident.” In fact, affected by negative news, Evergrande’s three major listed platforms have seen their stock prices plummet for two consecutive days.
This issue editor: Sun Qi
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