The Back Story of Evergrande you wouldn’t expect as Founder battles to Save it.
The Back Story of Evergrande you wouldn’t expect as Founder battles to Save it.
Born into poverty in rural China, Evergrande chairman and founder Hui Ka Yan built one of the world’s largest property firms, which is now buckling under $305bn in debt.
Four years after vying with Jack Ma for the title of Asia’s richest man, Evergrande chairman Hui Ka Yan’s fortune is plunging and his sprawling real estate empire is on the verge of collapse.
It’s a stunning reversal for a man who fought his way from poverty in rural China to build one of the world’s largest property companies. In previous times of trouble, Hui had been able to rely on the help of his tycoon friends and local government support. This time, with $305 billion in liabilities and the company’s asset prices plunging, Hui appears more alone than ever.
What happens to Mr Hui is open to question, including whether he will retain ownership of his empire. One of his allies and fellow billionaire, Zhang Jindong, lost control of the retail arm of his Suning conglomerate when it received a state-backed bailout in July – partly because he helped Mr Hui out during a tight spot. Other heads of failed companies have met with worse fates, from arrest to execution.
Mr Hui’s empire is turning into one of the biggest victims of President Xi Jinping’s efforts to curb the debt-fuelled excesses of conglomerates and defuse risks in the nation’s housing market. Evergrande and its affiliated companies were built through an aggressive mix of dollar debt issuance, share sales, bank loans and shadow financing – funding avenues that have been all but cut-off. The group now faces at the minimum a debt restructuring, which could be China’s largest ever.
Chinese Estates Holdings Ltd, controlled by the family of property mogul and fellow poker pal Joseph Lau, has been selling Evergrande stock and said it could unload its entire stake.
Mr Hui remains in charge of the group and was seen publicly at the Communist Party’s 100th-anniversary celebration in Tiananmen Square in July, illustrating the power of his political connections. He met with employees last month and signed a public statement emphasising the importance of finishing the construction of sold properties.
The lack of public support for Hui from Beijing and his tumbling fortune – down $15 billion this year – is forcing him to intensify efforts to save his empire, such as selling stakes in some of Evergrande’s once-prized assets.
Hui has survived plenty of challenges in the past. He touted millions of jobs the company created and billions of yuan paid as taxes. He also emerged a philanthropist, topping Forbes’s China list for charitable giving.
There was increasing concern about the size of the company’s debts, which by 2018 had swelled to more than $US100 billion. That year, China’s central bank singled Evergrande out for having the potential to pose systemic risks to the financial system, along with HNA Group, Tomorrow Holding Co and Fosun International Ltd. China’s era of conglomerates expanding through aggressive debt-fuelled acquisitions was ending.
Mr Hui pledged to cut his dependency on leverage and turned – as he had often done in the past – to friends and corporate connections to raise money.
He has been stepping up asset sales to find the cash to repay the company’s many creditors – from retail investors demanding payment on some 40 billion yuan in Evergrande high-yield investment products to the 1.6 million homebuyers who put deposits on apartments that have yet to be built, as well as bondholders. The company is Asia’s largest issuer of junk bonds. International ratings firms have repeatedly downgraded the company’s debt as concern grew the firm will default.
Evergrande agreed last month to sell part of its holding in a mainland bank to the local government in a deal that S&P Global Ratings said marked the first step toward solving the company’s liquidity crisis. Evergrande also negotiated the sale of a 51 per cent stake in its property services unit to Hopson Development Holdings Ltd, Cailian reported on October 4.
“If they can sell this unit successfully, it will help to repay short-term debts, but it will also limit the future growth of the company,” said Kenny Ng, a strategist at Everbright Sun Hung Kai Co.
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REFERENCES
- How Evergrande’s rags-to-riches founder is trying to save his empire
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- How Evergrande’s Rags-to-Riches Founder Is Trying to Save His Empire
- How Evergrande’s rags-to-riches founder is trying to save his empire
By The Japan Times
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