Writing | Liu Xingzhi
Editing | Wang Jing
At the age of 64, Xu Jiayin ushered in the most difficult Mid-Autumn Festival in his life.
On the evening of September 28, China Evergrande (03333.HK) announced that the company had received a notice from the relevant departments that Xu Jiayin, the executive director and chairperson of the board of directors, had been taken compulsory measures according to law on suspicion of illegal crimes.
At 9 a.m. that day, China Evergrande, Hengda Automobile, and Hengda Property were temporarily suspended from trading on the Hong Kong Stock Exchange. The evening announcement said that China Evergrande shares would continue to be suspended until further notice.
Xu Jiayin’s last public speech was at the Hengda Football Club management meeting on July 4 this year. Recently, there were rumors that Xu Jiayin was absent from the Hengda regular meeting, which was chaired by Sean, the company’s CEO and executive director.
Before this announcement, Xu Jiayin’s own whereabouts and status were always confusing; and since the "thunderstorm", the entire Hengda has also been in a state of "Schr?dinger’s cat", and any good news about it is often followed by a bad news. In July this year, Hengda reissued its 2021 and 2022 financial reports, and in August, Hengda Automobile officially announced a financing, but then it was exposed that Xu Jiayin had married and Hengda had filed for bankruptcy.
In fact, the outside world is not surprised by Xu Jiayin’s investigation. Since the beginning of this year, a number of Evergrande executives have been detained, the most recent being Zhu Jialin, the former chairperson of Evergrande Life Insurance.
Today, Evergrande, as its name suggests, has become one of the greatest sources of instability that continue to affect confidence in the real estate market.Among other top real estate companies, Sunac is one step away from the success of overseas debt restructuring. Country Garden has just completed the extension of domestic debt, but Evergrande has delayed it again and again. Finally, on September 22, it announced that "the relevant agreement arrangement meeting originally scheduled for September 25 and September 26 on the proposed restructuring will not be held."
In terms of policy, there have been frequent positive developments in the housing market recently, and "recognizing houses but not loans" has blossomed in various places. Guangzhou has fired the first shot of some first-tier cities to liberalize purchase restrictions.
However, Hengda is a constant source of bad news.
An industry insider who did not want to be named told the box lunch financial analysis that the most important issue for Evergrande at present is still the "protection of Jiao Lou", so the final outcome of Xu Jiayin and other senior management teams may not be settled until all parties reach a consensus on the protection of Jiao Lou and other issues.
This may mean that with the introduction of a series of policies, the risk disposal of leading real estate enterprises has made progress, and the final fate of Evergrande is entering the countdown.
01
Speculation about the fate of Evergrande’s executives began last year.
In the middle of last year, Xia Haijun, the former chief executive of Evergrande Group, traveled to Hong Kong on the grounds of dealing with overseas debts. Since then, his whereabouts have been completely unknown. Some say he is in Canada, others say he is in Australia, and more people believe he has gone to the United States.
Before Hengda’s thunder, Xia Haijun had long held the "No. 2 position" in Hengda, known as the "working emperor in the real estate industry". Although he was a "part-time worker", Xia Haijun, who was around Xu Jiayin, was obviously better informed. He sold his holdings of Evergrande dollar bonds and Evergrande stocks before Hengda’s thunder, accumulating more than 1 billion yuan.
On September 26, some media said that Xia Haijun and Pan Darong, the former chief financial officer of Evergrande, had been detained or taken away by the police, but some industry insiders questioned this. "Isn’t he in the United States?" the person said. "Of course it doesn’t matter where he is, and you can’t run away if you really want to catch him."
In addition to Xia Haijun, the whereabouts of several other important executives in Hengda are relatively clear.
In January this year, Ke Peng, the former CEO of Evergrande, was taken away by the police for investigation due to his involvement in Hengda’s old reform in Shenzhen, becoming the first Hengda executive confirmed to be behind bars.
The old renovation project is still the most important "ballast stone" of Evergrande, and there are many interests involved. According to Evergrande’s financial report, as of June 30, 2023, the company has a land bank of 190 million square meters and participated in 78 old renovation projects, including 55 in the Greater Bay Area (34 in Shenzhen) and 23 in other cities.
After half a year of calm, on September 16, Hengda Wealth General Manager Du Liang and other suspected criminals were taken criminal coercive measures by Shenzhen Public Security; five days later, on September 21, there were media reports that Zhu Jialin, the former chairperson of Hengda Life, was taken away for investigation.
Hengda Fortune and Hengda Life Insurance are the two most important pieces of Hengda’s financial map, and they are also Xu Jiayin’s "money bag".
Since August 2021, Hengda Wealth has experienced difficulties in redeeming. Xu Jiayin also shouted at the time, "I can have nothing, but the investors of Hengda Wealth cannot have nothing."
But Xu Jiayin reneged on his promise. On August 31 this year, Evergrande Wealth issued a document saying that because the asset disposal was not as expected, it did not obtain the asset disposal funds and could not carry out the payment in the month. With the arrest of Du Liang and others, whether Xu Jiayin "has nothing" may come to a conclusion.
As for Hengda Life, the day before Du Liang’s arrest, the China Banking and Insurance Regulatory Commission had approved Haigang Life to take over its insurance business and corresponding assets and liabilities. Referring to the previous investigation process of "Anbang Department", with the takeover of Hengda Life, it will also be clear whether there is a "trick" in Hengda’s operations before the thunderstorm.
So far, although it is still doubtful whether Xia Haijun and others have been controlled, Hengda’s old reform and financial traders have been controlled by relevant departments, and Xu Jiayin has been forced to take coercive measures. The regulatory authorities’ disposal of Hengda has entered the final stage.
In addition, it is worth noting that on the evening of August 14, the introduction of Xu Jiayin’s wife Ding Yumei in the notes to Evergrande’s announcement changed from "Mrs. Xu" to "Ms. Ding Yumei". With the progress of Evergrande’s disposal, the hidden feelings behind this marriage may also come to light.
02
Under the drastic changes in the fortunes of the core personnel, Evergrande’s business has also been affected.
Of course, for Evergrande, whose total liabilities 2.40 trillion, it is difficult to make any progress in the specific business. Evergrande’s most important "business" before is workout.
But it is precisely because Hengda’s debt hole is too large and difficult to return, and it is also difficult to promote the workout business. Since the beginning of this year, except for a few positive times, Hengda has faced the debt problem in a "flat" way.
According to public information, as of the end of July, Hengda Real Estate involved more than 30 million yuan in pending litigation amounts totaling 437.743 billion yuan, due unpaid debts of 2775.01 billion yuan, and overdue commercial tickets totaling 207.50 billion yuan. At present, Hengda Real Estate has more than 600 pieces of information on the person subject to execution, and the total amount of execution exceeds 55.70 billion yuan. In addition, there are many restrictions on consumption orders, dishonest persons subject to execution (Lao Lai) and final case information.
Under such pressure, on the evening of July 17, Evergrande reissued its 2021 and 2022 annual reports, which had been difficult to produce for two years, allowing the outside world to get a glimpse of Evergrande’s business in the past two years.
Financial data show that the past two years Hengda total net loss of 812 billion yuan, as of the end of last year, the company’s total debt 2.43741 trillion yuan, excluding contract liabilities for 1.71639 trillion yuan.
Even if the above figures make people gasp, investors are still willing to believe that this is a positive to some extent. After all, the issuance of financial reports is an important precondition for Evergrande’s stock to resume trading. In addition, Evergrande filed for bankruptcy protection in the United States on August 18, which is also seen by the outside world as the latest progress of Evergrande’s workout.
Therefore, although Hengda shares fell by nearly 80% on the first day of resumption of trading on August 28, with the restructuring seeming to be progressing and the introduction of multiple favorable policies in the real estate market, Hengda’s share price rose by 327% from the low point on the day of resumption.
But as Hengda executives were investigated one after another, the overseas workout review meeting was announced to be put on hold, and Hengda’s share price fell again. On the afternoon of September 27, after the news of Xu Jiayin’s residential surveillance broke, Hengda stocks collectively fell, and China Hengda, which had risen 14% in early trading, closed down 18.99% at HK $0.32, almost all of its previous gains.
According to media reports, after the workout meeting was put on hold, some overseas creditors of Evergrande Group said that if Evergrande could not propose a new workout plan before October 30, they would apply for liquidation.
03
As executives are being investigated one after another, the outside world is most concerned about when and how the lid on Evergrande’s fate will be opened.
The aforementioned industry insiders believe that Evergrande’s fate is likely to surface one step ahead of Xu Jiayin and other executives. He believes that whether it is by Evergrande itself, or through the cooperation of local governments, platform companies, asset management companies and other entities, after a clear and appropriate solution is formed on issues such as the protection of the building, the management may be held accountable. How to pursue it may also refer to their cooperation in the whole incident.
Overall, compared with Xu Jiayin’s personal fate and the fate of Evergrande, the current more urgent is the fate of the owners of Hengda’s unfinished building.
Now even Xu Jiayin and other senior executives have been investigated one after another, which either means that the relevant matters have been identified, or it means that the relevant departments no longer believe that Xu Jiayin has the will and ability to solve the relevant problems.
In fact, with the successive introduction of favorable policies, there has been much progress in risk management for housing enterprises other than Hengda.
On September 19, Sunac China’s overseas debt restructuring plan was passed with a high vote, and Sun Hongbin, who had been burnt out, passed the risk. Since September, Sunac’s share price has also recovered.
The next day, Country Garden’s 15 billion yuan domestic debt was successfully extended, and in early September, Country Garden paid two US dollar debt coupons in time for the grace period deadline to avoid substantive default.
On September 15, Sino-Ocean Group also announced that it would start a comprehensive restructuring of overseas debt, and said that the company has not defaulted on any open market, and the coupons on domestic corporate bonds and overseas US dollar bonds have been successfully extended, and the extended domestic corporate bonds will be repaid on time.
Under the support of policies, real estate companies such as Sunac and Country Garden have not yet completely escaped danger, but they have the ability to resolve risks independently. However, at present, whether in terms of attitude or ability, Evergrande is obviously an exception.
Coincidentally, Ren Zeping, an economist who once worked for Evergrande, published an article entitled "Real Estate Policy is Entering a Historic Turning Point" through WeChat’s official account "Zeping Macro" in the early morning of the 27th when Xu Jiayin was exposed to residential surveillance. The article mentioned that "it is time to optimize and adjust real estate policy".It is recommended to establish a real estate rescue fund by compacting the local main responsibility and supporting financial instruments to support the stability of the property, and to support high-quality real estate enterprises, especially private real estate enterprises, and support AMC and other mergers and acquisitions in the industry.
In fact, the "dismemberment" of Evergrande has been quietly carried out.
On the evening of September 27, Shengjing Bank (HK.02066) announced that it plans to sell some credit assets in accordance with laws and regulations, and the purchaser is Liaoning Asset Management Company.
Shengjing Bank used to be Evergrande’s "shadow bank", while Liaoning Asset Management Company is mainly engaged in the bulk acquisition and sale of non-performing assets of financial enterprises, which is controlled by the Liaoning Provincial Department of Finance.
There is not much time left for Evergrande.
