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Evergrande: Chinese crisis group admits manager misconduct


In the midst of its rescue efforts, the Chinese real estate company Evergrande has admitted questionable deals from managers. The political leadership is reportedly looking into a controlled collapse of the company.

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Evergrande logo with sloping letters in front of building complex in Luoyang


The ailing Chinese real estate giant Evergrande has made public misconduct by several high-ranking managers.

Six executives illegally redeemed several of the company's investment products in advance.

Evergrande said the matter was being taken very seriously.

The company is demanding a repayment of the redeemed funds from the managers and will impose "severe penalties."

Normally, the company's own investments are only allowed to be paid out after a certain holding time.

The managers reportedly cashed the investments ahead of schedule, contrary to the planned payment schedule.

The misconduct of the executives becomes known in the midst of an existence-threatening crisis of the highly indebted real estate giant.

Debts of the equivalent of more than 300 billion dollars weigh on the company.

Since the beginning of the year, the Group's share value has fallen by three quarters.

Most recently, several rating agencies had further downgraded Evergrande's creditworthiness and warned of payment defaults.

Comment makes the financial market sit up and take notice

Meanwhile, doubts are growing that the ailing group can count on government support.

For example, a comment appeared on Friday in a media close to the state that described government intervention as unlikely.

The author was Hu Xijin, editor-in-chief of the tabloid "Global Times".

According to him, an Evergrande bankruptcy would probably not shake the financial system like the collapse of the US investment bank Lehman Brothers.

China's second largest real estate developer is not so important that you have to prevent its failure by all means, Hu concluded in a post on social media.

The paper belongs to the empire of the ruling Communist Party.

However, the views expressed do not necessarily reflect those of the government.

Financial market observers also see dwindling chances of a state rescue operation.

The company is trying to find fresh funds to pay its numerous banks, suppliers and bondholders on time.

As with many large Chinese corporations, Evergrande's holdings are nested in more than 200 subsidiaries.

The loans and mutual financial obligations are hardly transparent.

Lenders should disclose their risks

The Evergrande bankruptcy could have a massive impact on the real estate market and banking sector in the world's second largest economy.

According to Reuters news agency, the Chinese leadership is working to make Evergrande collapse in a controlled manner.

According to Reuters, some banks are already preparing for loan defaults, while other creditors want to give Evergrande more time to repay loans.

Accordingly, all major Evergrande lenders should disclose to the Chinese central bank what risks would exist in the event of Evergrande bankruptcy.

For some time now, the Chinese leadership has been acting more strictly against corporations.

In the real estate sector, the authorities want to contain speculation and prevent a bubble from bursting.

Supervisory authorities are intervening against excessive lending by banks to real estate companies, restricting borrowing and setting upper limits - also in order to contain the growing risks in the financial sector as a whole.

mmq / dpa / Reuters

Source: spiegel

All business articles on 2021-09-18

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