By Clare Jim
HONG KONG (Reuters) – Mingling with power brokers at celebrations to mark the centenary of the Chinese Communist Party on July 1, 2021, a beaming Hui Ka Yan showed no signs that his company, China Evergrande Group, was facing mounting pressure paying its debts.
Hui, wearing a navy-blue suit and open-neck shirt, looked relaxed as he stood on a podium overlooking the festivities in Tiananmen Square, an invitation many considered an official show of support for the billionaire businessman.
A month earlier, the Evergrande group chairman had hosted a rare meeting with more than 1,000 suppliers and was once again flanked by the business elite, as he spoke of his debt deleveraging goals.
Just two years later, Hui, who founded Evergrande in 1996 in the southern city of Guangzhou, is under police surveillance, Bloomberg News reported on Wednesday, and his property empire is under growing risk of liquidation.
A person close to Evergrande said Hui had stopped contacting staff over the past few days, while an industry source said he had become totally inaccessible. Both of them declined to be identified as they were not authorised to speak to the media.
Spokespersons at Evergrande, the police department in Guangdong province, whose capital is Guangzhou, and the public security ministry did not respond to Reuters requests for comment.
Evergrande’s total liabilities stand at more than $300 billion, roughly the size of Finland’s gross domestic product, and the world’s most indebted developer’s troubles took a rapid turn for the worse this week.
The company, which has been seeking creditor approval for an offshore debt restructuring plan, said on Sunday it was unable to issue new debt due to an investigation into its main China unit, further complicating its revamp proposal.
Reuters reported on Tuesday that a major Evergrande offshore creditor group was planning to join a liquidation court petition filed against the developer if it does not submit a new debt revamp plan by the end of October.
The 64-year-old former steel technician, raised by his grandmother in a rural village in central Henan province, built his fortune on the back of low-priced homes.
Under Hui, the property developer expanded aggressively by raising loans to support its land-buying sprees and selling homes at lower margins for quick turnover. Evergrande grew to achieve 700 billion yuan ($95.8 billion) in annual sales by 2020.
In 2017, Hui was Asia’s richest man with a net worth of $45.3 billion, according to Forbes. Today his net worth is estimated at $3.2 billion.
Hui was known for keeping a low public profile and being a workaholic, who at times demanded that others followed his work style, three employees told Reuters.
He also set ambitious targets; when questioned by investors and reporters in the past decade about his highly leveraged projects, Hui said that Evergrande’s high turnover and asset value were sufficient to cover its debts.
POKER PALS
Hui did not shy away from new ventures, especially in support of China’s larger goals. He dabbled in electric cars and soccer, both a passion of Chinese President Xi Jinping.
Outside mainland China, Hui mixed with Hong Kong tycoons. With them, he became a core member of the “poker club”, a tight-knit circle of tycoons who often did investment deals together, according to three people familiar with the club.
“He was very composed when he was first brought to the club; he knowingly lost a lot of money in the games and gained the fondness of Cheng,” one of the people briefed by the tycoons said, referring to the late founder of New World Development, Cheng Yu Tung.
Cheng injected $150 million into Evergrande a year before its 2009 IPO in Hong Kong, according to Evergrande’s listing prospectus, helping it through a crunch during the financial crisis following its aggressive expansion,
Hui’s debt-laden businesses worried regulators who had warned Evergrande to get its house in order amid fears of contagion.
Speaking at the 2018 China Charity Awards as a winner for the 8th consecutive year, Hui said Evergrande had paid tax totalling 185 billion yuan in the past 22 years and donated more than 10 billion yuan.
“Without the country’s policy to reform higher education, I could not have left the village. Without the country giving me a scholarship of 14 yuan every month, I could not have completed university,” Hui said.
“Without the country’s good policy to reform and open up, Evergrande would not have what it has today. Therefore, everything that Evergrande and I have, they are all given by the Party, by the country, and by society.”
($1 = 7.3085 Chinese yuan renminbi)
