Evergrande Founder Steps Down as Chairman of Primary Mainland Unit

Hong Kong-listed China Evergrande’s share price fell 4.3 percent Tuesday on news that the embattled developer’s chairman, Xu Jiayin, had stepped down from the chairmanship of Hengda Real Estate, the Shenzhen-based group’s main property unit in China.

Xu is no longer listed as chairman of Hengda on the website of the state-run National Enterprise Credit Information Publicity System, the billionaire’s name having been replaced with that of Zhao Changlong, a former chairman of Evergrande Property Services and long-time company executive.

No announcement or explanation of the personnel move had appeared on the Hong Kong stock exchange’s website as of late Tuesday.

The latest twist in the Evergrande saga comes as speculation swirls that the world’s most indebted developer may be headed for a restructuring as asset sell-offs and unpaid creditors mount.

Back Door Slammed Shut

While Xu’s departure from Hengda has fuelled speculation of broader changes at Evergrande Group, a report on the Sina news website quoted a person close to Evergrande as saying the reshuffle was normal because an effort to secure a mainland stock-market presence for the company had ended and the action did not involve changes in the specific management structure or equity.

Hengda had been the focus of a four-year-long attempt at a back-door listing in Shenzhen, a plan that eventually fizzled last November after the company failed to acquire necessary approvals. Most of the company’s strategic investors agreed not to demand repayment despite the failure.

Later that November, Evergrande Property Services managed to raise $1.8 billion in a Hong Kong IPO of its own, albeit downsized from the $3 billion haul originally envisioned.

This month, Moody’s Investors Service cut the corporate family ratings for Hengda and the parent group by two notches, to Caa1 from B2, citing Evergrande’s heightened refinancing risk in light of its weakened funding access and liquidity position.

Scramble for Cash

With overdue bills piling up, Evergrande has launched a frenzy of asset sales. The group continues to reduce its shareholding in its Hong Kong-listed internet division, HengTen Networks Group, as it announced plans earlier this month to offload a HK$3.25 billion ($420 million) stake.

That news came less than two months after the company sold a $570 million stake in HengTen, a mainland joint venture formed by Evergrande and internet giant Tencent in 2015.

Aside from the HengTen stake sales, Evergrande in June sold a nearly $400 million interest in smaller developer Calxon.

The group is also in talks to sell stakes in Evergrande Property Services and the Evergrande NEV electric car unit. Mainland media reported last week that developers China Vanke and Country Garden were walking away from discussions regarding the acquisition of stakes in the property services unit.

Evergrande may have received a respite from its debt woes recently, with Bloomberg reporting last Thursday that three major creditors — China Minsheng Banking Corp, China Zheshang Bank and Shanghai Pudong Development Bank — had given the cash-strapped firm more time to repay maturing loans.