The 13.4 billion was seized by banks four months ago. By then Evergrande had defaulted on offshore bonds and the debt crisis about to come to light.
Photo from CFP
By HUANG Yu
For months, Evergrande has been investigating how 13.4 billion yuan (US$2 billion) of its money was used as collateral for someone else’s loans and seized when the borrower couldn’t pay. On Friday it came up with some kind of an answer. The borrowed money was actually diverted back to Evergrande itself, via third parties, and used for ordinary business operations.
Evergrande commissioned independent investigators to find that the money was used as collateral for three sets of loans for which Evergrande Property was the guarantor. The first 2 billion yuan was taken out by a third party in December 2020 and eventually returned to Evergrande Group via another third-party company. Who these various third parties were, Evergrande declined to disclose.
Evergrande Property’s pledge was seized in September 2021 when the borrower couldn’t pay the debt. A subsequent 8.7 billion and 2.7 billion yuan followed similar arrangements.
CEO XIA Haijun, CFO PAN Darong and Executive President KE Peng have resigned. The chair and two directors of Evergrande Property were also forced out.
Evergrande is trying to get the money back by transferring assets to Evergrande Property to repay the loans. New CEO Siu Shawn is actively working to resolve the matter and will “further strengthen risk management.”
Siu defended the unusual arrangement on the basis that the loans were neither embezzled nor misappropriated for personal gain, but used for business purposes at a time of tremendous liquidity pressure,
The group has “come to a preliminary agreement” with its latest posse of creditors on restructuring yet another mountain of debt. Evergrande, according to the new boss, will “continue to be transparent” about the whereabouts of its funds and hold executives accountable for their decisions.