Evergrande Seen Likelier To Fall As Chairman Probed

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Based on its current situation and consultations with its advisors and creditors, the company said, it's necessary to re-assess the terms of the proposed restructuring plan.

Evergrande said Sunday that it is unable to meet the qualifications for the issuance of new notes under the present circumstances as its Shenzhen-listed subsidiary Hengda Real Estate Group is being probed.

Suspicions

In fact, Hengda Real Estate had already said on August 16 that it was being investigated by the Chinese Securities Regulatory Commission (CSRC) for suspected violation of information disclosure regulations.

It was on August 17 that Evergrande filed for bankruptcy protection to the Manhattan bankruptcy court, seeking recognition of restructuring talks underway in Hong Kong, the Cayman Islands and the British Virgin Islands.

Noting that date, Zhang Yinyin, a Shanghai-based columnist, writes in an article that when Evergrande said on August 16 that Hengda Real Estate was being probed, it already knew that its proposed debt restructuring plan would fail.

“It does not make sense to blame 'worse-than-expected sales' for the cancellation of the offshore creditor meeting,” Zhang says.“It would be strange if an indebted developer had strong sales.”

Zhang says that, even if its subsidiaries and executives were not being probed, it would be very difficult to restructure the debts of Evergrande – which has a liability of 2.4 trillion yuan (US$329 billion) and a need to raise another 200 to 300 billion yuan.

Yang Shih-kuang, a Taiwanese commentator, said in a TV program on Monday that Beijing's recent move to reduce capital outflow has also become a new obstacle for Evergrande to pay its offshore creditors and implement its debt restructuring plan.

Yang said that, from Beijing's perspective, indebted property developers' top mission is to ensure the delivery of apartments to homebuyers.

Citing three sources, Reuters reported on September 11 that the PBoC is tightening its scrutiny of bulk dollar purchases by domestic firms amid a weakening renminbi. Companies now need approval from the central bank to purchase as little as US$50 million.

Last year, Evergrande delivered 300,000 apartments, about half its target, to its customers. In the first half of this year, it delivered 120,000 apartments. Media reports say the company still is obligated to deliver 400,000 more apartments to its buyers.

Last Saturday, a social media post about Hui's arrest went viral on the Internet. It said Hui was handcuffed as he had resisted the arrest.

Ran Xiongfei, a veteran soccer reporter, who is believed to be familiar with the situation, said people should not trust or spread the rumor but wait for an official announcement. Some other commentators said it's unlikely that a 64-year-old billionaire would resist an arrest.