Evergrande, the indebted Chinese property group, has announced that its billionaire chair, Hui Ka Yan, is under mandatory measures for suspicion of illegal crimes. This development adds to the uncertainty surrounding the fate of Evergrande, which has been locked in a secretive restructuring process since defaulting on its international debts two years ago. The company has faced numerous setbacks, including the detention of employees, a derailing of its restructuring plan, and missed payments on onshore bonds. With over $300 billion in liabilities, Evergrande’s future appears to be tied to Beijing as policymakers grapple with a property slowdown that continues to impact economic growth.
Investors in Evergrande’s offshore debt were expected to vote on a plan that would have resulted in receiving new notes linked to the equity of the group’s Hong Kong-listed subsidiaries. However, the plan was derailed due to an official investigation, the details of which have not been disclosed. Despite setbacks, parties involved in the restructuring are working to salvage the plan without conflicting with regulators. The restructuring has attracted significant attention, as its failure could result in a massive liquidation that would have far-reaching consequences for various stakeholders.
While the restructuring’s outcome remains uncertain, it is crucial for Evergrande to survive not only to support the economy and appease domestic investors and suppliers but also to maintain China’s appeal to foreign investors. The wipeout of Evergrande’s dollar bonds would damage the outlook for offshore debt issuance at a time when China is seeking more foreign investment. With the stakes high, authorities are sensitive to domestic market turbulence, and they have already started showing signs of easing policies designed to cool the housing market. The government’s stance on Evergrande and its restructuring remains unclear, but the recent announcement regarding Hui suggests that there could be consequences for the individuals involved, adding further doubt to the restructuring process.
