Agencies and staff reporter
Hui Ka-yan, the billionaire chairman of beleaguered property developer China Evergrande, has been placed under police control, according to people with knowledge of the matter.
Hui was taken away by Chinese police earlier this month and is being monitored at a designated location, a source said, asking not to be identified due to the matter being private.
It’s not clear why Hui is under so-called “residential surveillance,” a type of police action that falls short of formal detention or arrest and does not mean Hui will be charged with a crime.
Still, the measure means he is unable to leave the location, meet, or communicate with others without approval, according to China’s Criminal Procedure Law. Passports and identification cards must be handed to the police, but the process shouldn’t exceed six months, according to the law.
Shares of Evergrande closed 19 percent lower to HK$0.32 yesterday on the news. Its electric vehicle unit China Evergrande New Energy Vehicle tumbled 20 percent and its property services arm Evergrande Property Services fell 14.5 percent.
The move is the latest sign that the saga at the world’s most indebted developer has entered a new phase involving the criminal justice system after authorities earlier this month detained some staff at its wealth management unit, along with two former executives.
The move also came after it was reported that a major group of offshore creditors of Evergrande was planning to join a court petition to liquidate the developer if it doesn’t submit a new debt revamp plan by next month, two sources familiar with the matter said.
The creditor group holds a large portion of Evergrande offshore bonds and, if it decides to join, would add more weight to the petition filed against the developer by an investor in a Hong Kong court.
Evergrande’s offshore debt restructuring plan, unveiled in March, has been thrown into uncertainty after the developer said on Sunday it was unable to issue new debt due to an ongoing regulatory investigation into its main unit in China.
The unit said in a regulatory filing to the Shenzhen Stock Exchange yesterday that it is still working with all parties to jointly resolve the debt risk.
Separately, Chinese developer CIFI’s shares plunged by 58.5 percent after trading resumed yesterday upon the release of its earnings, which underscored a prolonged property downturn.
The slide came after a reported net loss of almost 9 billion yuan (HK$9.66 billion) in the first half of the year.
”Similar to most other distressed developers, we believe CIFI’s liquidity stress is unlikely to be resolved anytime soon,” JPMorgan analysts including Karl Chan wrote in a note, citing a lack of funding access and weak sales.
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