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Heavily indebted Chinese developer Evergrande replaced its chief executive officer and chief financial officer after an internal investigation found that they were involved in a scheme resulting in banks claiming more than $2bn from a subsidiary.
In March, the group said mystery lenders to a property services unit seized more than $2bn of its cash. The seizure threatened to hit the remaining value of Evergrande’s international bonds, which are trading at a fraction of their $20bn value following the company’s default late last year.
Evergrande said in a statement late on Friday that Xia Haijun, its chief executive, and Pan Darong, its chief financial officer, had both resigned over the claim, where Rmb13.4bn ($1.9bn) of deposits at Evergrande Property Services were pledged as security for “third party guarantees”.
The company said that “based on the information from the preliminary investigation” Xia and Pan “participated in the above arrangement”. It added: “In view of this, the board resolved to request such persons to resign from their positions within the group.”
The property group’s collapse last year was part of a larger crisis in China’s real estate sector that has dragged down growth in the country. The world’s second-largest economy narrowly avoided a contraction in the second quarter, with gross domestic product expanding 0.4 per cent, year on year.
Evergrande has more than $300bn of liabilities, about $20bn of which are offshore dollar-denominated bonds. Its collapse has rattled the offshore dollar bond market and put pressure on local governments that relied heavily on the real estate market for revenue and growth.
Ke Peng, an executive at another Evergrande subsidiary, Hengda Real Estate Group, also participated in the arrangement and has also resigned, said Evergrande.
Shawn Siu, who is currently chair of Evergrande’s electric vehicle company, will become the new chief executive and Qian Cheng, an executive with the group, will take the chief financial officer role.
The company said that it was in talks with its subsidiary, Evergrande Property Services, over a repayment plan of the pledges, but did not give more details.
“The plan is mainly to set off the relevant sums by transferring assets of the Group to Evergrande Property Services,” Evergrande said.
In an interview with 21st Century Business Herald, a Chinese website, published on Friday, Siu said there was no personal appropriation of funds found during the investigation.
“The funds were used for the Group’s operations and repayment of the Group’s domestic and foreign debts,” Siu said.
The developer added that it was “considering” appointing an internal control consultant to review the company’s risk management procedures and would release a report about the investigation.
Evergrande is expected to announce its restructuring plan later in July. Hui Ka Yan, the billionaire founder of the group, remains an executive director after stepping down as chair last year.
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Image and article originally from www.ft.com. Read the original article here.