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China has detained an executive of Evergrande’s vehicle unit, threatening to further complicate the outlook for the restructuring of the world’s most indebted property group.
Liu Yongzhuo, an executive director of China Evergrande New Energy Vehicle Group, was detained on Monday over “suspicion of illegal crimes”, the company said in a filing to the Hong Kong stock exchange.
The disclosure of Liu’s detention comes as Evergrande is due to face a hearing in a Hong Kong court over demands from offshore bond holders to wind up the company on January 29.
In an earlier restructuring plan rebuffed by investors, Evergrande offered to issue new bonds and swap some of its offshore debt with stakes in its EV unit and Hong Kong-listed affiliate Evergrande Property Services Group.
That proposal was derailed in September when Evergrande said in an exchange filing that it could not issue the “new notes” required under the proposal because its business in China was being investigated by authorities over alleged breaching of disclosure rules.
The detention of the EV executive has added to Evergrande’s challenges, said analysts. The company’s shares fell 9.6 per cent in trading on Monday.
“Such a move is somewhat expected, but it still casts a shadow over the already slow restructuring process,” said Gary Ng, a senior economist at investment bank Natixis. “Creditors probably need to wait even longer if more key assets run into uncertainty.”
Liu joined Evergrande in 2003, according to a company profile. Before joining the EV business, Liu worked across the Evergrande empire, including in its real estate operations as well as its football team. Evergrande did not immediately comment on the detention.
In September, the company said its chair, Hui Ka Yan, was placed under “mandatory measures” over illegal activities, a term that implies residential surveillance or detention by Chinese officials. Employees of Evergrande’s wealth management subsidiary were also detained that month, police said.
No further details were disclosed about the allegations or the “measures” concerning Hui. Neither the company nor Chinese officials have provided an update on the health and personal security of the Evergrande founder, once China’s richest person.
The property developer launched the EV business in 2019, as it worked to diversify beyond real estate. However, the EV business reported cumulative losses of Rmb98.9bn ($13.8bn) as of end 2022, according to its latest annual report released in 2023.
Creditors are now demanding more stakes in Evergrande itself and its units to compensate for their debt obligations. In December court proceedings, Evergrande proposed giving “certificates” to creditors — “neither a share nor a bond but a right to distribution based on certain assets”.
Additional reporting by Chan Ho-him in Hong Kong
