China Evergrande, the embattled Chinese real estate developer, said late Friday that its chief executive had resigned, the latest setback for the company struggling to manage its crushing $300 billion debt.
In an announcement, the company said its CEO, Xia Haijun, had resigned over his involvement in a plan to funnel $2 billion into Evergrande’s coffers from one of its subsidiaries.
A preliminary investigation found that the funds, which belong to Evergrande Property Services, had been used as collateral to guarantee a series of loans, money that was then funneled into Evergrande through a third party, the company said.
When the loans failed to repay late last year, banks seized the $2 billion from the property management unit. In March, Evergrande postponed the filing of its annual results as it needed to investigate why banks had claimed Evergrande Property Services’ money.
Evergrande, who did not identify the third party facilitating the loans, said the funds were being used for “general operations” but went no further.
China Evergrande said it had asked Mr Xia and Pan Darong, the finance director, to resign over their involvement in the plan, along with another director. Evergrande did not specify the role the executives had played, but it said Mr Xia and Mr Pan had “no disagreements” with the board over the resignation.
Evergrande has said it will announce a restructuring plan later this month. Once China’s largest real estate developer, the company has struggled to pay off debts of more than $300 billion to creditors after the government forced debt-laden real estate companies to curb loans, rendering the company unable to source suppliers. pay and complete projects. The company went into default in December.
The debt problems Evergrande faces have spread to other overstretched property developers in China, fueling concerns about a potential housing crisis that could threaten an already fragile economy. Evergrande said it had appointed Siu Shawn, an executive director at the company, to take over as chief executive. It appointed Qian Cheng as its new finance director.
An independent committee investigating Evergrande Property Services’ $2 billion is expected to complete its work and issue a report as soon as possible. Evergrande also said it was developing a repayment plan with the subsidiary, and is considering appointing a consultant to evaluate internal controls and risk management.
Claire Fu research contributed.
