Xu Jiayin was taken compulsory measures in accordance with the law, and the progress of Evergrande's debt restructuring may be affected

The rumors about Xu Jiayin finally settled. On the evening of September 28, China Evergrande issued an announcement saying that the company had received a notice from the relevant departments that Xu Jiayin, the company's executive director and chairman of the board, had been taken compulsory measures in accordance with the law because of suspected violations and crimes.

On the morning of the same day, three Evergrande companies, China Evergrande, Evergrande Auto and Evergrande Property, issued an announcement that trading in the company's shares was temporarily suspended from 9 a.m., and all three Evergrande companies resumed trading shortly after.

The collective suspension of trading by the three companies has led the market to speculate that something big may happen to Evergrande. Unexpectedly, the relevant rumors about Xu Jiayin's situation came true.

A number of industry insiders believe that as the person in charge of Evergrande, Xu Jiayin was taken compulsory measures, which will affect the progress of debt restructuring.

China Evergrande announced that Xu Jiayin, the company's executive director and chairman of the board, has been taken compulsory measures in accordance with the law because of suspected violations and crimes. Photo/IC photo

Lawyers say this may just be the beginning

Since September 23, news about Xu Jiayin's situation has been circulating in the market. On September 28, China Evergrande, Evergrande Automobile, and Evergrande Property suspended trading on the Hong Kong Stock Exchange, which caused many discussions.

Regarding the reason why Xu Jiayin was suspected of violating the law and committing a crime and was taken compulsory measures, Evergrande did not reply.

Wang Yuchen, director of Beijing Jin Law Firm, analyzed that judging from the announcement, Xu Jiayin's suspected illegal crimes have been "hammered" and compulsory measures have been taken. This shows that the public security organs have relatively sufficient evidence of Xu Jiayin's suspected crime, otherwise they will not take compulsory measures against him.

Wang Yuchen further said that from the time when Evergrande executives were placed on file for investigation to now that Xu Jiayin has been taken compulsory measures, it all shows that Evergrande has now entered a period of great crisis. Xu Jiayin was taken compulsory measures, I am afraid that this is only the beginning, and there may be a series of big moves in the future.

On the evening of September 16, the Nanshan Branch of the Shenzhen Municipal Public Security Bureau announced that recently, the public security organs have taken criminal compulsory measures against Du and other suspected criminals of Evergrande Financial Wealth Management (Shenzhen) Co., Ltd. in accordance with the law, and investors can register if they need to report the case.

It is understood that on August 31 this year, Evergrande Wealth official micro-announced that because the company's asset disposal progress was not as expected, and the asset disposal funds were not obtained, the company could not carry out this month's payment, and the subsequent payment arrangement will be announced separately.

Regarding the Xu Jiayin incident, in the view of Yan Yuejin, research director of the E-House Research Institute, such an announcement issued by Evergrande Enterprise sits on the fact that the Evergrande debt problem is not a simple financial and economic dispute issue, and it involves a large financial default and illegal operation. From this perspective alone, the anti-corruption work of real estate enterprises began with the incident of Evergrande's accountability, and other real estate enterprises have no possibility of luck.

Evergrande's debt restructuring may face uncertainty

Xu Jiayin has been taken compulsory measures, and the ongoing debt restructuring of Evergrande may face uncertainty.

Zhang Hongwei, founder of Jingjian Consulting, said that without a decision-maker, Evergrande's debt restructuring is expected to be interrupted for a period of time, and things will be delayed. It is expected that the relevant departments will soon take measures, such as a large enterprise hosting Evergrande.

Wang Yuchen believes that Xu Jiayin's compulsory measures may affect Evergrande's debt restructuring, after all, Xu Jiayin, as the chairman of the board of directors of Evergrande, has a lot of influence on the future direction of Evergrande, and also has a big impact on the future development of Evergrande.

In fact, before that, Evergrande's debt restructuring has had bad news.

On September 24, China Evergrande issued an updated information announcement on overseas debt restructuring, saying that in view of the fact that Evergrande Real Estate is under investigation, the current situation cannot meet the qualifications for the issuance of new notes. This means that Evergrande's debt restructuring may face uncertainty.

According to the announcement, all new notes to be issued under the proposed restructuring must comply with the "Trial Measures for the Administration of Overseas Issuance and Listing of Securities by Domestic Enterprises" issued by the China Securities Regulatory Commission and the "Administrative Measures for the Examination and Registration of Medium and Long-term Foreign Debts of Enterprises" issued by the National Development and Reform Commission, and China Evergrande must prove that it complies with the relevant requirements. For the above reasons, China Evergrande's current situation is not eligible for the issuance of new notes.

Previously, on August 16, Evergrande Real Estate issued an announcement on the Shenzhen Stock Exchange that it received the "Notice of Case Registration" issued by the China Securities Regulatory Commission, and because the company was suspected of violating information disclosure laws and regulations, in accordance with the "Securities Law of the People's Republic of China", "Administrative Punishment Law of the People's Republic of China" and other laws and regulations, the China Securities Regulatory Commission decided to file a case against Evergrande Real Estate.

The issuance of new notes is an important part of China Evergrande's debt restructuring plan. In its debt restructuring plan in March this year, Evergrande's Option 1 stated that creditors of the agreement could receive new notes at a conversion ratio of 1:1 of the amount they could receive, with a maturity of 10-12 years and to be repaid over time. Under Option 2, the agreement arranges for creditors to elect to convert their reimbursable amount into new notes to be issued by the company with a maturity of 5-9 years.

In addition, under the Jingcheng Arrangement, creditors will receive five new notes issued by Jingcheng with maturities of 4-8 years in the aggregate principal amount of US$6.5 billion. Under the space-based agreement arrangement, creditors will receive four new notes issued by Space-based with maturities of 5-8 years in the aggregate principal amount of US$800 million.

In addition to the blockage of new note issuance, China Evergrande's overseas debt restructuring related meetings were postponed again. According to an announcement issued by China Evergrande on September 22, since March 22 this year, China Evergrande's sales have not been as expected. Based on the current situation of China Evergrande and its consultations with its advisers and creditors, China Evergrande believes that it is necessary to re-examine the terms of the proposed restructuring to match its objective circumstances and creditors' demands. As a result, the meetings on the proposed restructuring scheduled for 25 September and 26 September will not be held. And this is already the third extension.

The market is also concerned about whether Xu Jiayin's compulsory measures will affect the "guaranteed handover building"? Wang Yuchen said that Evergrande has many subsidiaries across the country, and each company is relatively independent. Therefore, for buyers who bought Evergrande's house but encountered a mess, as well as investors who invested in Evergrande, they need to pay close attention to the next direction of Evergrande, but don't worry too much. Since the state has made a move, and the "guarantee of handover building" involving so many ordinary people, there should be a corresponding solution in the end.

Beijing News reporter Duan Wenping

Edited by Yang Juanjuan Proofreader Yang Xuli