Yangtze River Business Daily reporter Jiang Chuya
After leaving a mess that is difficult to clean up, the former "real estate hero" Xu Jiayin may also enter the endgame.
On September 28, China Evergrande (03333. HK、EGRNY. US) issued an announcement on the Hong Kong Stock Exchange, saying, "The Company has received notice from the relevant authorities that Mr. Xu Jiayin, an executive director and chairman of the board of directors of the Company, has been taken compulsory measures in accordance with the law due to suspected violations and crimes. ”
Before that, several executives of China Evergrande had been taken away for investigation.
After the helmsman was taken away, the listed companies of Evergrande that had just resumed trading also collectively announced the suspension of trading, and China Evergrande and Evergrande Automobile (00708. HK) and Evergrande Properties (06666.HK) both suspended trading at 9am on 28 September.
The once real estate giant was on the verge of bankruptcy, and the once richest man, Xu Jiayin, has fallen.
Xu Jiayin was suspected of breaking the law and committing a crime and was taken compulsory measures. Visual China map
Xu Jiayin's net worth shrank by more than 90%
Xu Jiayin has always been known for his wolf nature, radicalism, and conceit. The "gambler mentality" was evident from the very beginning of his business.
Xu Jiayin was born in the "farmgate" and was the first college student in the village. In 1982, after graduating from university, he was assigned to Wugang, Henan, and after ten years of hard work, he resigned from Wugang with a "gambler mentality" and went south to Shenzhen to pan for gold.
In 1996, Xu Jiayin founded Guangzhou Evergrande Industrial Group Co., Ltd. and officially entered the real estate industry. He took a risk of borrowing 6 million yuan to develop Jinbi Garden, the first project in Guangzhou, and earned his first pot of gold. With this as a starting point, Evergrande entered a stage of rapid expansion.
Catching up with the historic opportunity of China's urbanization development, in the tide of the times, Xu Jiayin wielded leverage and radically expanded. In just three years, Evergrande stood out from more than 1,600 real estate enterprises in Guangzhou and became one of the top 10. In just 10 years, Xu Jiayin has developed an obscure enterprise into a group company with more than a dozen subsidiaries, including the listed company Evergrande Real Estate, and has been listed on the gold list of China's top 500 enterprises.
In 2009, Evergrande Real Estate was listed in Hong Kong, and in 2016, Evergrande's sales amount reached 373.37 billion yuan, becoming the annual sales champion.
Xu Jiayin was an ambitious businessman who had a wide range of interests outside of real estate. Real estate, football, finance, health, cultural tourism, new energy vehicles... Evergrande's total assets quickly swelled from less than 10 billion yuan to more than 2 trillion yuan.
The model of high turnover, high leverage and diversification has made Evergrande's scale expand rapidly and has also become the culprit of its fall.
From the perspective of car manufacturing alone, in 2019, Xu Jiayin announced that he plans to invest 45 billion yuan in three years to build cars. However, after a few years, Evergrande Automobile has become the "loss king of the automotive industry", with a cumulative loss of more than 91 billion yuan between 2020 and 2022, and a net loss of 6.873 billion yuan in the first half of 2023.
In 2021, China Evergrande's revenue was cut and generated a huge net loss of 686.219 billion yuan, and its income further declined in 2022, with a net loss of 125.814 billion yuan, and a continued loss of 17.9 billion yuan in the first half of 2023.
The former glory has dissipated, and in 2017, the "Hurun Report 2017" showed that Xu Jiayin became China's richest man with a fortune of 290 billion yuan. The "2023 Hurun Global Rich List" shows that Xu Jiayin's net worth is only 20 billion yuan, more than 90% smaller than at its peak.
China Evergrande's restructuring plan has changed
According to financial report data, as of the end of June 2023, China Evergrande's total liabilities reached 2.39 trillion yuan, 1.78 trillion yuan after excluding contract liabilities of 603.98 billion yuan, and the total asset value in the same period was 1.74 trillion yuan. In other words, China Evergrande is insolvent.
During the same period, China Evergrande had a total of RMB13.381 billion in funds on hand, of which only RMB4.047 billion in cash and cash equivalents, and more than RMB9 billion in restricted funds.
On September 28, Evergrande Real Estate Group Co., Ltd. announced that as of the end of August 2023, the company and its subsidiaries (issuers) within the scope of the merger had a total of 1,946 pending litigation cases with a subject amount of more than 30 million yuan, and the total subject amount was about 449.298 billion yuan. As of the end of August 2023, Evergrande Real Estate had accumulated approximately RMB278.532 billion in outstanding mature debts and approximately RMB206.777 billion in overdue commercial notes.
In addition, according to the China Enforcement Information Disclosure Network, during August 2023, Evergrande Real Estate Group Co., Ltd. added 163 new enforcement information, with a total amount of 9.128 billion yuan, and 68 new equity interests of subsidiaries and shareholding companies that were frozen as enforcers.
In order to avoid bankruptcy liquidation, Evergrande has already initiated overseas debt restructuring.
However, on the evening of September 22, China Evergrande released updated information on overseas debt restructuring.
The announcement shows that since March 22, 2023, the sales of Evergrande Group have not been as good as the company expected. Based on the Company's current circumstances and consultations with its advisers and creditors, the Company believes that it is necessary to revisit the terms of the proposed restructuring to match its objective circumstances and creditors' demands, and the debt restructuring meeting will not be held.
On the evening of September 24, China Evergrande announced that in view of the fact that its subsidiary Evergrande Real Estate Group is under investigation, the group's current situation cannot meet the qualifications for the issuance of new notes.
Xu Jiayin's compulsory measures have undoubtedly added uncertainty to Evergrande's restructuring plan.
Restructuring is difficult, where will Evergrande go?
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