Evergrande crisis: CEO Xia Haijun sold all his dollar bonds before developer’s 2021 default on offshore debt, records show
- Vice-chairman and CEO Xia Haijun sold US$128 million face value in three dollar bonds in July and August last year, filings on Wednesday show
- Evergrande, which defaulted in December after failing to service the interest on two dollar bonds, has pledged to offer a debt workout plan in six months
China Evergrande’s top insider sold his holding of dollar-denominated bonds issued by the developer in a series of transactions in August last year, before its liquidity crisis worsened and led to a debt default.
Xia Haijun, vice-chairman and chief executive of the Shenzhen-based developer, sold US$50 million in face value of the notes due in 2022, US$50 million of the notes due in 2023 and US$28 million of the notes due in 2025, according to his new filings late on Wednesday.
The bonds were sold at prices between 35.9 cents and 52.4 cents on the dollar from July 27 to August 17, generating a total of US$56.5 million of proceeds. His purchase cost was not disclosed. He also did not explain why it took more than five months to report the changes. Prices have since slumped below 15 cents since Evengrande defaulted in December.
The developer, once China’s biggest by sales, is crumbling under 1.97 trillion yuan (US$310 billion) of liabilities as its cash crunch kept homebuyers at bay and Beijing’s “three red lines” policy shut the company and many of its indebted peers out of the loan market.
A surge in borrowing costs in offshore market has also frozen access to bond market funding, with effective yield on Chinese junk-rated debt more than doubling to 23 per cent this week from 10.5 per cent in June last year. It reached 25 per cent in November, a level not seen since March 2009, according to ICE BofA index.
While Evergrande has pleaded for more time to restructure, some impatient creditors have turned hostile, including Oaktree Capital which seized its grandiose Versailles-like project in Yuen Long in New Territories, Hong Kong. The investors had loaned US$520 million to the developer, according earlier news reports.
Evergrande’s crisis deepened after a mainland Chinese court froze the assets of its onshore subsidiary on a petition by a lender. The group struggled to repay suppliers and contractors. It also faced demands from investors who bought billions of its so-called yuan-based high-yielding wealth management products, sparking ugly scenes outside its headquarters.
The developer was downgraded to default by Fitch in December, citing its failure to pay interest on two bonds with a face value of US$645 million and US$590 million after a 30-day grace period.
Xia, who has more than 30 years of experience in property development and corporate management, is in charge of daily operations, including financial and capital operation and public affairs.
Last August, he also sold about HK$115.6 million worth of shares in the group’s Hong Kong-listed electric-car making unit and property management arm.
Evergrande told investors and creditors last month that it intends to roll out a debt restructuring plan within six months and would “continue to listen carefully to the opinions and suggestions of the creditors”.
Author: Pearl Liu, SCMP