Recently, a blockbuster news caused a strong shock in the financial world. The fate of China Evergrande Group and its chairman, Xu Jiayin, has finally been settled. According to the announcement of the Hong Kong Stock Exchange, Xu Jiayin, executive director and chairman of the board of directors of China Evergrande, has been taken compulsory measures by relevant departments in accordance with the law for suspected violations and crimes. This news has undoubtedly caused an uproar for Evergrande Group and the entire Chinese real estate industry.
Xu Jiayin's "precautions"
It is worth noting that just hours before the announcement, the troika of the Evergrande family, China Evergrande, Evergrande Auto and Evergrande Property, also urgently suspended trading on the Hong Kong Stock Exchange. This abnormal operation has caused various speculations and rumors from the outside world, and the details in it have made people more curious about Xu Jiayin's situation.
In fact, this is not the first time that Xu Jiayin has disappeared from the public eye. Since July 24 this year, Xu Jiayin inquired about the situation of several regional companies at the Evergrande Baojiao Building meeting, and has not appeared in public. Although the incident in which most of Heng's executives were taken away for investigation in early August once caused speculation from the outside world, Xu Jiayin was not directly affected at that time. However, with the Shenzhen police report on the evening of September 16, Evergrande's chief executive Xia Haijun and chief financial officer Pan Darong were controlled or taken away, Xu Jiayin's situation seemed to begin to take a sharp turn.
Now, with the announcement of the Hong Kong Stock Exchange, Xu Jiayin has been officially taken compulsory measures, and this series of events seems to have been settled. However, for Evergrande Group and Xu Jiayin, the road ahead will be challenging.
Evergrande's debt restructuring road
In recent years, the development of China Evergrande Group has been difficult. Not only did the sales performance not exceed expectations, but the overseas debt restructuring process also suffered a heavy setback. In March, Evergrande unveiled a US$19.149 billion offshore debt restructuring plan, offering three options to creditors, including issuing new notes to match creditors' demands. However, due to the recent investigation of Evergrande Real Estate Group, a subsidiary of China Evergrande, the Group was unable to meet the eligibility for the issuance of new notes, and the issuance of new notes was postponed indefinitely.
In addition, China Evergrande's debt restructuring plans were also affected by its net loss. According to the company's financial report in the first half of this year, China Evergrande's revenue in the first half of this year was 128.18 billion yuan, and the gross profit was only 9.80 billion yuan; during the period, the operating loss was 17.38 billion yuan, the non-operating loss was 15.03 billion yuan, the income tax expense was 6.84 billion yuan, and the total net loss was as high as 39.25 billion yuan. As of June 30, 2023, China Evergrande's total liabilities amounted to RMB2,388.2 billion. After excluding contract liabilities of 603.98 billion yuan, it is 1.78 trillion yuan. These figures show that China Evergrande's financial situation is already in an extremely difficult situation.
Still, debt restructuring is crucial for Evergrande. By restructuring debt, a company's financial pressure can be alleviated, giving it more time and space to gradually improve its operating conditions. However, with Xu Jiayin's compulsory measures, Evergrande's debt restructuring path has also become uncertain. As the principal of the group, Xu's decision-making and influence were critical to the success of the restructuring plan. Xu Jiayin's investigation undoubtedly had a direct impact on Evergrande's debt restructuring plan.
Outlook for the future
For Evergrande Group, the road ahead will be full of challenges. While Xu's coercive action may cause some headaches for the restructuring plan, it may also provide an opportunity for Evergrande to re-examine its problems and seek new solutions.
On the one hand, Evergrande's debt restructuring plan needs to continue to advance. For existing debt problems, companies need to actively communicate and negotiate with creditors to find suitable solutions. Consensus may be reached by reaching an agreement with creditors to extend the debt maturity or by offering alternative debt restructuring options. In addition, Evergrande also needs to actively seek new sources of capital to supplement its cash flow and support the company's daily operations.
On the other hand, Evergrande also needs to actively respond to the competition and challenges in the current market. Despite financial pressures and leadership changes, Evergrande needs to continue to monitor changes in market demand and the development of the competitive landscape. Attract more customers and increase sales by optimizing products and services, enhancing brand image and strengthening marketing strategies, thereby positively impacting the company's operating conditions.
In addition, as the dust settles on the news of Xu's investigation, Evergrande will also need to start adapting to the emergence of new leadership. While it is unclear how the new leadership will affect Evergrande's future development, it is certain that the company needs a strong leadership team to lead it out of its current predicament and achieve stable growth.
In short, for Evergrande Group, the future road is full of twists and turns. However, through efforts to actively promote the debt restructuring plan, cope with market competition and strengthen internal management, Evergrande is expected to gradually get out of the difficulties and usher in new development opportunities under the new leadership.