Evergrande’s staunchest allies drop out as Chinese property developer’s creditworthiness deteriorates amid debt woes
- Joseph Lau Luen-hung and Chan Hoi-wan sold 138 million Evergrande shares several times last month for HK$500 million, according to exchange filings
- Lau and Chan cut their stakes to 7.96 per cent, second only to Hui Ka-yan’s controlling stake of 70.7 per cent in Shenzhen-based Evergrande
The couple’s disposals followed an 85 per cent plunge in Evergrande’s stock price and market value in the past year, as the property developer struggles to find cash to settle financial liabilities estimated at US$300 billion.
Lau was the cornerstone investor and subscriber of US$50 million of Evergrande’s shares during its 2009 initial public offering.
In the same year, Chinese Estates sold some offices in Chengdu for HK$6.5 billion, and a residential property complex in Chongqing for HK$1.75 billion, all to Evergrande.
Evergrande faces a key liquidity test next week when it is due to pay US$83.5 million in interest on September 23 for a dollar-denominated note, in addition to 232 million yuan (US$36 million) for a renminbi note, according to data compiled by Bloomberg.
S&P piled in, downgrading Evergrande’s creditworthiness to the junk status of “CC”, implying that the company’s bonds are of “very high risk”, non-investment grade.
Last week, hundreds of investors and Evergrande staff staged a protest at the company’s Shenzhen head office to demand refunds of investment products that they bought from the company. The unusual event comes at a sensitive time for China’s authorities, as they are anxious to avoid civil disturbances during the centenary of the ruling Communist Party.
Hui, also known as Xu Jiayin in mainland China, is a delegate to the Chinese People’s Political Consultative Conference (CPPCC), the advisory body to the legislature.
To placate angry staff and investors, Evergrande plans to offer discounted real estate products in lieu of cash, according to creditors who have been informed about an announcement scheduled for September 20.