Poster printing sales

Embattled billionaire Hui Ka Yan struggles to hold on to his crumbling empire

Once China’s richest person, Hui falls outside the top 100 for the first time in 14 years.

Hui Ka Yan, the founder of real estate company China Evergrande Group, has lost almost all of his once colossal fortune. Worth $42.5 billion and ranked Asia’s richest person at his peak in 2017, her wealth has been significantly diminished as debt troubles plague the beleaguered developer. Yet as pressure mounts for the former tycoon to find a concrete way to pay off his company’s debts, analysts say he will likely lose a lot more.

The 64-year-old, who dropped out of the 2022 ranks of China’s 100 richest for the first time since debuting in 2007, now has an estimated net worth of $2.9 billion, an amount based entirely on dividends he has received over the years, although some has since been invested in mansions, jets and a yacht. The number excludes Hui’s 60% stake in Evergrande, whose shares were suspended from trading in March, and still cannot meet criteria for resumption. Even before the suspension, the company had lost around 95% of its maximum value.

But even his personal assets are not safe from company creditors. Hui was forced to use 1 billion dollars on his own money to pay off Evergrande’s debt at the end of last year earlier this year, and he sold earlier this year two luxury apartments at reduced prices – one in Shenzhen city and one in Guangzhou – for a total of 50 million dollars (360 million yuan), apparently to help pay more.

As Evergrande scrambles to come up with a plan to restructure its over $300 billion liability, which someone familiar with the matter says is likely to be delayed again and pushed back to 2023 due to the size and complexity of the case, more of his remaining trophy assets are likely at risk. Chen Zhiwu, professor of finance at the University of Hong Kong, said that in a radically changed political environment in China, the pressure is “really strong, if not stronger” for Hui to continue paying off corporate debt with his own. silver.

In fact, one of his three homes in Hong Kong’s prestigious The Peak district was grasped by China Construction Bank (Asia) last week in November after Evergrande defaulted on a property-backed loan of $90 million (estimated market value).

“Of course, he would like his personal assets and corporate assets to be very clearly separated, which officials are unwilling to accept,” Chen said. “This means that when his company’s debt is in default, some of his personal wealth may have to be used to contribute to payments to creditors.”

Hui, who according to the company’s Evergrande website is still a member of the ruling Communist Party, has pledged his other two luxury homes in the same upscale Hong Kong district as collateral for loans from Orix Asia Capital. It is also looking to sell his 45-bedroom Knightsbridge mansion overlooking London’s Hyde Park area, two years after he bought it from a Saudi prince for $232 million. And he owns private jets and a $60 million superyacht he may be forced to sell.

While Evergrande’s income has fallen off a cliff (it’s only checked in $2.5 billion in contract sales in the first eight months of the year, a roughly 96% drop from a year earlier), Hui is unlikely to convince creditors that the company may one day generate enough cash for future repayment.

Of course, he would like his personal and corporate assets to be very clearly separated, which officials are not prepared to accept.

Chen Zhiwu, professor of finance at the University of Hong Kong

Meanwhile, a national mortgage boycott by angry buyers, who have paid for their purchases in full but are not getting apartment complexes delivered on time after struggling developers like Evergrande ran out of money, are pressuring the government. To quell public protests, which are rare in China, officials agreed to release special loans totaling $27.6 billion (200 billion yuan) to help with this type of work. Victor Shih, an associate professor of political economy at the University of California, San Diego, says banks were likely asked to lend to local government funding agencies, so they could buy up unfinished projects from real estate companies in difficulty in a small discount. Evergrande said by September, it had resumed work on 95% of its 706 pre-sold but undelivered construction projects.

But outside of protecting the interests of average homebuyers, few expect Beijing to reverse course and unveil broader sector bailouts, which are seen as crucial to restoring confidence among offshore creditors. . Kaven Tsang, senior vice president of Hong Kong-based Moody’s Investors Service, said the economic pain inflicted by the property slump – including defaults, falling sales and rapidly slowing growth – is “in the [government’s] tolerance level.

“The central government has made it clear in the past that it is not going to use the real estate sector to support the economy,” Tsang says. “We haven’t seen any changes so far.”

Ron Thompson, Hong Kong-based managing director of consultancy Alvarez & Marsal Asia, says he thinks it will take at least two years for housing demand in China to stabilise. Moody’s estimated in October that property sales in China would continue to decline over the next 12 months, after falling 21% in August from a year earlier and 15.3% in September. The risk of default remains high, given that the country’s developers have at least $55 billion in bonds due over the next two years, but face weaker sales and limited refinancing options.

In this environment, bond investors mired in restructuring failing promoters “don’t expect 100 cents on the dollar” and are likely to demand stock and other collateral to offset their mounting losses, Thompson says. Alvarez & Marsal Asia. Those who lent specifically to Hui are increasingly taking matters into their own hands, with more asset seizures and “liquidation” requests to liquidate assets due to unpaid financial obligations, says Brock Silvers, chief investment officer based in Hong Kong at Kaiyuan. Capital, which invests in distressed assets.

Evergrande faces a liquidation hearing in Hong Kong on November 28, which was first filed in June by creditor and Samoa-based investment firm Top Shine Global Limited for more than $110 million in unspecified financial obligations.

Evergrande’s Hong Kong headquarters, which it acquired for $1.6 billion (HK$12.5 billion) in 2015 from Chinese Estates Holdings, controlled by Hui’s billionaire friend Joseph Lau, was also seized by creditors and recently put up for sale. The 26-story China Evergrande Center in Wan Chai is now worth an estimated $1 billion, and the bidding process concluded in late October. would have drawn billionaire interest Li Ka-shingof CK Asset Holdings.

Hui seems to be pinning his last hope on electric cars. China Evergrande New Energy Vehicle Group, listed in Hong Kong two-thirds owned by parent company Evergrande and whose trading has also been suspended since March, announced in late October that it had delivered the $24,700 Hengchi 5 electric sport utility vehicle to the first batch of 100 buyers, marking a “major milestone” for Hengchi Auto. Parent company Evergrande also said in a July file that it can offer stakes in its EV unit as part of an “additional credit enhancement” package to restructure offshore debt.

But Shen Meng, managing director of Beijing-based investment bank Chanson & Co., says electric vehicle deliveries offer little comfort to creditors. The beleaguered Hui, who once cherished ambitions to become China’s Elon Musk and propel Evergrande above Tesla, still has a long way to go before establishing Hengchi as a stable brand.

“The first batch deliveries do not mean the maturation of Evergrande’s EV business, as it will take quite a bit of effort to start larger-scale production and mass delivery,” Shen said. “The EV unit is unlikely to be seen as a reliable asset, and it won’t help much in the restructuring process.”