Rumors about Xu Jiayin finally settled. On the evening of September 28, China Evergrande issued an announcement saying that the company had received a notice from relevant departments that Xu Jiayin, the executive director and chairperson of the board of directors of the company, had been taken compulsory measures according to law for suspected illegal crimes.
On the morning of the same day, China Evergrande, Hengda Automobile, and Hengda Property, three Hengda companies, announced that the company’s shares had temporarily stopped trading at 9 a.m., and the three Hengda companies had resumed trading shortly thereafter.
The three companies collectively suspended their trading, which made the market speculate that something big might happen to Evergrande. Unexpectedly, the relevant rumors about Xu Jiayin’s situation came true.
Many industry insiders believe that, as the head of Evergrande, Xu Jiayin was forced to take measures, which will affect the progress of the workout.
China Evergrande announced that Xu Jiayin, the executive director and chairperson of the board of directors of the company, has been taken compulsory measures according to law on suspicion of illegal crimes. Photo/IC photo
Lawyers say this could be just the beginning
Since September 23, news of Xu Jiayin’s situation has been circulating in the public. On September 28, China Evergrande, Evergrande Automobile and Evergrande Property suspended trading on the Hong Kong Stock Exchange, which caused many discussions.
Hengda did not respond to the reason why Xu Jiayin was taken coercive measures for suspected crimes.
Wang Yushen, director of Beijing Jinsheng Law Firm, analyzed that from the announcement, Xu Jiayin’s suspected crime has been "real" and coercive measures have been taken. This shows that the public security organs have relatively sufficient evidence of Xu Jiayin’s suspected crime, otherwise they will not take coercive measures against him.
Wang Yuchen further said that in the past, Hengda executives were investigated and now Xu Jiayin has been taken coercive measures, which all shows that Hengda has now entered a period of great crisis. Xu Jiayin’s coercive measures are probably just the beginning, and there may be a series of big moves in the future.
On the evening of September 16, the Nanshan Branch of Shenzhen Public Security Bureau announced that recently, the public security organs have taken criminal compulsory measures against Du and other suspected criminals of Evergrande Financial Wealth Management (Shenzhen) Co., Ltd. If investors need to report the case, they can register the case.
It is understood that on August 31 this year, Hengda Wealth official Weibo announced that because the company’s asset disposal progress was less than expected and no asset disposal funds were obtained, the company was unable to carry out this month’s redemption, and subsequent redemption arrangements will be announced separately.
For the Xu Jiayin incident, in the opinion of Yan Yuejin, Chief Research Officer of E-House Research Institute, the announcement issued by Evergrande this time confirms the fact that Evergrande’s debt problem is not a simple financial and economic dispute, but involves a large financial default and illegal operation. From this perspective alone, the anti-corruption work of real estate enterprises began with the incident of Hengda’s accountability, and other real estate enterprises have no chance of getting lucky.
Evergrande workout or face variables
Xu Jiayin was forced to take measures, the ongoing Hengda workout, or face variables.
Zhang Hongwei, founder of Mirror Consulting, said that without a decision-maker, Evergrande’s workout is expected to be interrupted for a period of time, and things will be delayed. Relevant departments are expected to take measures soon, such as a large enterprise hosting Evergrande.
Wang Yuchen believes that Xu Jiayin’s coercive measures may affect Evergrande’s workout. After all, Xu Jiayin, as the chairperson of Evergrande’s board of directors, has a significant impact on Evergrande’s future direction and the future development of Evergrande.
In fact, before this, Hengda workout has seen bad news.
On September 24, China Evergrande issued an update on overseas workout information, saying that in view of the investigation of Evergrande Real Estate, the current situation cannot meet the eligibility for the issuance of new notes. This means that Evergrande’s workout may face variables.
The announcement shows that all new bills to be issued under the proposed restructuring must comply with the "Trial Measures for the Administration of Overseas Issuance of Securities and Listing of Domestic Enterprises" issued by the China Securities Regulatory Commission and the "Measures for the Administration of the Examination and Registration of Medium and Long-term Foreign Debt of Enterprises" issued by the National Development and Reform Commission according to their applicable circumstances. China Evergrande must prove that it meets the relevant requirements. In view of the above reasons, China Evergrande’s current situation cannot meet the eligibility for the issuance of new bills.
Previously on August 16, Hengda Real Estate announced in the Shenzhen Stock Exchange that it had received the "Notice of Filing" issued by the China Securities Supervision Commission, because the company was suspected of information disclosure violations, according to the "Securities Law of the People’s Republic of China" and the "Administrative Punishment Law of the People’s Republic of China" and other laws and regulations, the China Securities Supervision Commission decided to file a case against Hengda Real Estate.
The issuance of new notes is an important part of China Evergrande’s workout plan. In the March workout plan this year, Evergrande Agreement Arrangement Plan 1 stated that the agreement arrangement creditors can obtain new notes at a conversion ratio of 1:1 of their recoverable amount. The new notes have a term of 10-12 years and will be repaid over time. Under Option 2, the agreement arrangement creditors can choose to convert their recoverable amount into: 5-9 years New Notes to be issued by the company.
In addition, under the Jingcheng Arrangement, creditors will receive five new notes issued by Jingcheng with a term of 4-8 years for a total principal amount of $6.50 billion. Under the Space-based Arrangement, creditors will receive four new notes issued by Space-based with a term of 5-8 years for a total principal amount of $800 million.
In addition to the blockage of new note issuance, China Evergrande’s overseas workout-related meetings have also been postponed again. According to China Evergrande’s announcement released on September 22, China Evergrande’s sales since March 22 this year have not been as expected. Based on the current situation of China Evergrande and its consultations with its advisors and creditors, China Evergrande believes that it is necessary to re-examine the terms of the proposed restructuring to match its objective situation and creditors’ demands. Therefore, the relevant agreement and arrangement meetings on the proposed restructuring originally scheduled for September 25 and September 26 will not be held. This is the third postponement.
The market is also concerned about whether Xu Jiayin’s coercive measures will affect "Baojiaolou"? Wang Yuchen said that Evergrande has many subsidiaries all over the country, and each company is relatively independent. Therefore, for buyers who bought Hengda houses but encountered unfinished business, as well as investors who invested in Evergrande, they need to pay close attention to the next direction of Evergrande, but do not worry too much. Now that the state has taken action, and the "Baojiaolou" involving so many ordinary people, there should eventually be a corresponding solution.
Duan Wenping, reporter of Beijing News
Editor, Yang Juanjuan, Proofreader, Yang Xuli