4 days ago
Evergrande liquidators target founder's assets in pivotal stage
[HONG KONG] More than a year after China Evergrande Group's liquidators began pursing the wealth of seven key defendants, the high-profile case is now entering a critical phase.
So far Hui Ka Yan, the founder of Guangzhou-based Evergrande, has refused to disclose his assets, escalating tensions between him and creditors. That's adding to the challenges for liquidators who are preparing to hone in on the billionaire during a hearing scheduled on Sep 2.
Liquidators are sifting through files and looking at some 3,000 entities related to Evergrande, just as the firm announced plans to delist in August. At the heart of the matter is US$6 billion worth of assets in the form of mostly dividends and remuneration that were paid to people, including Hui and other defendants. The property mogul was known for his lavish lifestyle and exemplified the country's real estate boom and bust.
The court's decision could influence how other wealthy founders and executives behind troubled Chinese developers disclose their assets. The country's developers have defaulted on about US$150 billion of debt since the property crisis began, according to data compiled by Bloomberg.
So far, much of the trial has focused on Hui's ex-wife Ding Yumei and former chief executive officer Xia Haijun. Both managed to delay, but not avoid, disclosure of their assets, despite hiring some of the most expensive lawyers in town.
If liquidators manage to convince the high court to have Hui reveal his holdings, it could help them locate wealth that amounts to about an eighth of the firm's preliminary estimated US$45 billion debt load. It would also be a victory for creditors who have yet to pocket a penny nearly 19 months after Evergrande was wound up.
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Hui's network
Clarity on Evergrande's assets tied to Hui is crucial for liquidation, as filings show he controls nearly 60 per cent of the company. Hui has pocketed more than US$7 billion over the past decade thanks to the firm's generous payouts, according to data compiled by Bloomberg.
Getting Hui to detail his wealth is just the first step in a long process of recuperating funds. The liquidators also have to contend with complexities onshore. It's been challenging for offshore investors to get their hands on assets that sit in the mainland, which has a separate jurisdiction from Hong Kong.
Last year, a mainland court accepted a liquidation application filed against one of Evergrande's major onshore units, Guangzhou Kailong Real Estate.
Kailong is fully owned by Evergrande and has a stake of around 60 per cent in Hengda Real Estate, the developer's main property operation onshore.
Last March, Chinese regulators accused Hengda Real Estate of inflating more than 560 billion yuan (S$100 billion) of revenue by recognising sales in advance, an alleged fraud that dwarfs that of Luckin Coffee and Enron. Evergrande was fined 4.2 billion yuan, leaving even less money for offshore creditors.
The liquidators said that they have been made aware of hundreds of credit actions, including the onshore bankruptcy proceedings of Guangzhou Kailong.
Evergrande will be removed from the Hong Kong stock exchange on Aug 25, a year and a half after the shares were suspended and almost 16 years after it was listed.
Information on Hui's latest status and whereabouts have been scarce. In late 2023, Bloomberg reported Hui was taken away by Chinese police, and was being monitored at a designated location under so-called residential surveillance, a type of police action that falls short of formal detention or arrest.
Apart from a company filing confirming Hui being put under control, the Chinese authorities have remained tight-lipped about his status since then.
That's why creditors are trying to unearth more information about people within Hui's personal network. They include Hui's two sons. One of them, Peter Xu, who once ran Evergrande's wealth management unit, was taken into custody after the developer allegedly failed to pay people who invested in its investment products, local media reported in 2023. The Guangdong police did not respond to a query for comment.
Ex-wife properties
Hui also has underage children and two grandchildren, who are being looked after by Hui's ex-wife in London, a March court filing shows.
Ding holds real estate globally worth as much as US$350 million, including 33 luxury properties in Carnation Way in Nine Elms, south of the River Thames in London; a condominium on the 47th floor in One Wall Centre in the heart of downtown Vancouver, according to public records.
An 'astonishing' amount of art collections were found in the 'humid' apartment in Guangzhou where Ding's mother resides, the liquidators' lawyer said in a previous court hearing.
As for former CEO Xia, his whereabouts are unknown as he refused to provide his current address to the court. Xia has almost US$500 million in assets at stake from his previous salary, shares and investments in Evergrande, according to data compiled by Bloomberg.
Xia managed to hold off disclosing his assets for about a year until around mid-year. Liquidators still have doubts about what he's shared so far, according to a court filing. He is still seeking relief from sanctions.
Hui could deploy the same strategy used by his ex-wife and Xia, including asking for court adjournments, appealing and refusing to comply with disclosure rulings.
'The stakes couldn't be higher,' for Hui and his family, said Daniel Margulies, a partner at Simpson Thacher & Bartlett. BLOOMBERG
