According to a report by Bloomberg News on Wednesday, the chairman of China Evergrande Group has been put under police observation, casting more uncertainty on the developer's future while it also grapples with the growing possibility that it may have to liquidate.
Hui Ka Yan, who created Evergrande in southern Guangzhou city in 1996, was hauled away by police earlier in the month and is being watched at a specific location, according to the report, which cited people with knowledge about the situation.
It was unclear why he was put under residential surveillance. Bloomberg News added that the procedure was a police measure that does not constitute official detention or arrest, nor does it indicate that Hui will be accused of a crime.
The report could not immediately be confirmed, and the request for comment was not immediately answered by Evergrande, the police force in Guangdong province, or the country's public security ministry.
China's real estate market, which makes up about a quarter of the second-biggest economy in the world, has been experiencing an extraordinary liquidity crisis, with Evergrande at the center of it. Evergrande is the highest-indebted real estate developer in the world.
Evergrande, once the top-selling developer in China, experienced a financial problem that became public in 2021. Since then, along with a number of its competitors, they have all defaulted on their debt commitments related to offshore borrowing in the face of sluggish home sales and a lack of fresh funding opportunities.
The news that Hui is being watched comes as the possibility of its liquidation grows stronger and the company's offshore debt restructuring plan, which was crucial to its survival in the face of a severe liquidity shortage, appears to be in jeopardy.
According to a report on Tuesday, if the developer does not submit a fresh debt overhaul plan by the end of October, a sizable offshore Evergrande creditor group will join a court lawsuit seeking the company's liquidation.
The business shook the markets on Sunday when it revealed that a regulatory inquiry into its primary Chinese subsidiary, Hengda Real Estate, prevented it from issuing additional bonds as part of its plan to restructure its debt.
Hengda claimed that it had missed the deadline for paying interest and principal on a bond worth 4 billion yuan, or $547 million, by September 25 in another filing on Monday.
Wednesday's afternoon trading on the Hong Kong market saw an increase of 1.3% in Evergrande's stock value, while the HSMPI index, which tracks mainland developers listed in Hong Kong, saw no change from its previous trading session.
Coupon payment
Evergrande's most recent problems come as market participants are also paying close attention to Country Garden, another notable Chinese developer, which is confronted with a new bond coupon payback deadline on Wednesday.
The $40 million coupon, which has a grace period of thirty days and is connected to an 8%, $1 billion bond that expires in January, is the most recent payment difficulty that Country Garden is encountering as the developer works to prevent default.
The No. 1 private developer in the nation, whose financial difficulties deteriorated the outlook for the real estate sector and caused Beijing to announce a slew of assistance measures in recent weeks, frantically worked to avoid defaults this month.
Offshore creditors anticipate that Country Garden will postpone the payment of the coupon due on Wednesday and use the grace period as an opportunity to formulate measures for restructuring all of its offshore debt.
An inquiry for comment was not immediately answered by a Country Garden official.
The collapse of industry giants in the Chinese real estate sector has been unsettling. Private and mixed-ownership developers continue to face a high default risk until Chinese regulators provide stimulus strong enough to boost confidence in the real estate market and promote property sales.