Evergrande, the debt-laden real estate developer at the center of China’s real estate crisis, has confirmed that its billionaire chairman, Hui Ka Yan, is under investigation for illegal crimes. The company has received notification from relevant authorities that Hui has been subjected to mandatory measures in accordance with the law. As a result, Evergrande has suspended trading of its shares until further notice. This news comes after reports that Hui was placed under residential surveillance, which restricts his movement and communication, without clear indication of criminal charges.
Evergrande’s shares have plummeted over 80% since resuming trading at the end of August, reflecting the severity of the company’s financial woes. The real estate giant, once among China’s largest developers, faced a liquidity crisis due to new regulations aimed at reducing risk in the industry. The company defaulted on its debt last year, which triggered a chain reaction of defaults among other developers. Evergrande reported losses of $81 billion over 2021 and 2022, and in August, it disclosed another loss of $4.5 billion in the first half of 2023. The company currently has liabilities of $327 billion against assets of $238 billion.
This recent development adds to Evergrande’s series of setbacks. The company has canceled crucial meetings with creditors and revealed its inability to issue new debt due to a regulatory probe into its subsidiary. Former executives have been detained as part of an investigation into potential fund misuse. Furthermore, Evergrande missed another bond payment, and a winding-up petition, which seeks to liquidate the company, is scheduled for a hearing at the end of October. Some creditors are prepared to support liquidation if a viable restructuring plan is not presented soon. Evergrande’s future remains uncertain as it grapples with its severe financial challenges.