China has an idea for Evergrande.
Hui Ka Yan should help pay the company’s debt. Out of his personal wealth.
It’s a novel idea. Billionaires should take responsibility for the behemoths they create. The buck stops here. Literally.
“Beijing’s directive to the Evergrande founder came after his company missed an initial September 23 deadline for a coupon payment on a dollar bond,” Bloomberg reported on Tuesday, citing unnamed sources.
Evergrande eventually paid the $83.5 million coupon (green in the figure, below). With just hours to go before a 30-day grace period lapsed, the company wired the funds to creditors late last week.
On Tuesday, at least two holders of the 8.25% dollar note maturing in March of next year said they did, in fact, receive payment before the grace period lapsed. Failure to make payment within the 30-day window could have triggered cross-defaults. The next test comes later this week, when the grace period on another note is set to expire.
“Local governments across China are monitoring Evergrande’s bank accounts to ensure company cash is used to complete unfinished housing projects and not diverted to pay creditors,” Bloomberg went on to write, citing the same sources in the linked article above.
Hui’s net worth is down by two-thirds in 2021, a year that’s cost him nearly $16 billion personally (figure below).
On the bright side, he could afford to lose it. As of Monday, his net worth was still nearly $8 billion on Bloomberg’s calculations.
Obviously, Hui couldn’t satisfy all of the conglomerate’s obligations, although after Monday, Elon Musk nearly could. Evergrande’s liabilities sum to nearly $300 billion.
But he could help with paying retail investors with overdue wealth products and, theoretically at least, make coupon payments to help the company avoid a default on its dollar debt. On Tuesday, Beijing told firms in “key” industries to repay offshore bonds in order to help prevent spillover from Evergrande.
Earlier this week, Beijing-based Modern Land China, a green developer, failed to repay principal and interest on a $250 million bond. In a filing, the company cited “unexpected liquidity issues arising from the adverse impact of a number of factors including the macroeconomic environment, the real estate industry environment and the COVID-19 pandemic.” The board and management “are assessing” the group’s financial condition and cash position.
Offshore defaults total $8.7 billion so far in 2021, the most ever. Property firms are behind $3 billion of that total.
As far as Hui Ka Yan and China’s “directive,” he’ll be happy to oblige. Or at least if his past remarks are any indication.
In 2018, a year during which he made an official list of outstanding entrepreneurs, Hui said, “Everything in Evergrande, it’s from the Party, the country, and society. So we should bear social responsibility.”
“Common prosperity” indeed.