Unlock Editor’s Digest for free
FT editor Roula Khalaf has chosen her favorite stories in this weekly newsletter.
China has detained Evergrande’s auto executives, threatening to further complicate the outlook for the world’s most indebted real estate group.
Liu Yongzhuo, executive director of China Evergrande New Energy Vehicle Group, was detained on Monday on “suspects of illegal crimes,” the company said in a filing to the Hong Kong Stock Exchange.
The announcement of Mr. Liu’s detention comes as Evergrande prepares for a Jan. 29 hearing in a Hong Kong court over a request by offshore bondholders to liquidate the company.
In an earlier restructuring plan that was rejected by investors, Evergrande would issue new bonds and exchange some of its offshore debt for shares in its EV arm and Hong Kong-listed affiliate Evergrande Real Estate Service Group. I was proposing it.
The proposal was announced in September by Evergrande, which said in an exchange filing that it would not be able to sell the “new banknotes” required under the proposal because its operations in China are under investigation by authorities for allegedly violating disclosure rules. The proposal failed after the company stated that it could not be published.
Analysts said the detention of EV executives further increased Evergrande’s challenges. The company’s shares fell 9.6% in Monday trading.
“While this move was somewhat expected, it still casts a shadow over an already delayed restructuring process,” said Gary Ng, senior economist at investment bank Natixis. “If there is uncertainty for more key assets, creditors will likely have to wait even longer.”
According to the company profile, Mr. Liu joined Evergrande in 2003. Prior to joining the EV business, Liu worked across the Evergrande empire, including in real estate operations and soccer teams. Evergrande did not immediately comment on the detention.
In September, the company announced that its chairman, Hui Kar Yang, had been placed under “enforcement measures” for misconduct. The term refers to residential surveillance and detention by Chinese authorities. According to police, an employee of Evergrande’s asset management subsidiary was also detained in the same month.
Further details about the allegations or “measures” regarding Mr. Hui were not disclosed. Neither the company nor Chinese authorities have provided updates on the health or safety of Evergrande’s founder, once China’s richest man.
The real estate developer launched an EV business in 2019 in an effort to diversify beyond real estate. However, according to the latest annual report released in 2023, the EV business reported a cumulative loss of RMB 98.9 billion ($13.8 billion) at the end of 2022.
Creditors are now demanding increased stakes in Evergrande itself and its divisions to cover the debt. In court proceedings in December, Evergrande proposed giving creditors “certificates” that would be “right to receive distributions based on specific assets, not stocks or bonds.”
Additional coverage of Chan Ho-him in Hong Kong