Evergrande Continues To Slide After Billionaire Hui Ka Yan Steps Down From Onshore Unit
Shares of Chinese real estate developer Evergrande dropped as much as 4.9% in Hong Kong on Wednesday, extending losses from the day before when the company’s billionaire chairman, Hui Ka Yan, unexpectedly stepped down from a key onshore unit.
Hui, 62, resigned as chairman of Hengda Real Estate, a subsidiary that is responsible for property development in mainland China and contributed to 88% of Evergrande’s revenue last year. He will be succeeded by Zhao Changlong, a long-time lieutenant who also works as the onshore unit’s general manager. Hui remains chairman of Hong Kong-listed Evergrande, where his 76.7% stake gives him a fortune of $14.6 billion.
In a Wednesday stock exchange filing to regulators in Shanghai, Hengda says Hui is stepping down due to the company’s decision to abandon a plan to seek an A-share listing, and his departure won’t have any negative impact on Hengda’s management, daily operations or its ability to repay debt. Its Hong Kong-listed parent Evergrande didn’t respond to e-mailed requests for additional comment.
Still, the management reshuffle appeared to have hit investors’ already fragile confidence in Evergrande, especially as they are on the watch for any sign that may indicate a worsening in the parent company’s financial health. Evergrande plunged 4.3% on Tuesday, bringing this year’s share price loss to 73%, when Hui’s resignation was first revealed through a change in a filing with China’s National Enterprise Credit Information Publicity System.
Such a system hosts vast amounts of corporate information, like registration year and key management personnel, but is typically not used for announcements. Yan Yuejin, director of the Shanghai-based E-house China Research and Development Institution, says Hui’s departure may allow him to spend more time on pressing issues such as reducing Evergrande’s whopping 1.95 trillion yuan ($301 billion) in total debt.
“He took the Hengda chairman role in 2017, when the property business was enjoying great momentum,” Yan says. “But in fact, after 2019, growth has been coming down.”
Now, Evergrande faces multiple lawsuits from the company’s suppliers, who demand freezing of assets for overdue payments. It was also once sued by China Guangfa Bank, which successfully asked a local court to freeze $20 million in deposits held by Hengda. The dispute was resolved later, with Evergrande pledging to deepen cooperation with Guangfa.
Hui, in the meantime, is considering selling equity interests in some key subsidiaries, including its Hong Kong-listed electric vehicle unit Evergrande New Energy Vehicle Group and property management subsidiary Evergrande Property Services Group, to raise proceeds for debt repayment. With the company remaining in breach of China’s three red lines policy, which stipulates clear caps on debt-to-asset ratios, it hasn’t issued any dollar-denominated bond in the offshore market this year.