China Evergrande, the embattled Chinese real estate developer, announced that its CEO Xia Haijun and its CFO Pan Darong had resigned. The company struggled to manage its crushing $300 billion debt and defaulted in December. China Evergrande said it had asked its CEO, CFO, and another executive to resign over their involvement in a loan scheme to funnel $2 billion into Evergrande’s coffers via subsidiaries and third parties.
The indebted company was investigating how deposits worth RMB13.4 billion (som $2 billion) belonging to its subsidiary Evergrande Property Services were used as collateral for pledge guarantees and seized by banks. The preliminary investigation found that the funds belonging to the subsidiary had been used as collateral to guarantee a series of loans. The loaned money was then retransferred to Evergrande Group through a third party, the company said. The announcement explained several explained three specific loan scheme transactions.
In December 2020, for example, a subsidiary of Evergrande Property Services provided a third party company
with an RMB2 billion deposit certificate pledge guarantee, enabling that third party company to obtain a bank loan of an equal amount. The funds obtained (after deducting fees) were indirectly transferred to the Evergrande Group via other third parties. These funds were used for “general operations,” according to the announcement.
When the loans were not repaid late last year, banks seized the $2 billion from the property management unit. In March, Evergrande delayed filing its annual results, saying that it needed to investigate why banks had claimed the funds from Evergrande Property Services.
The independent investigation committee of the company will complete the relevant investigation
as soon as possible and issue an investigation report.
