China Evergrande Group and its liquidators are seeking to recover $6 billion in dividends and remuneration from seven defendants including the developer’s founder Hui Ka Yan, a formal step toward recouping at least a fraction of creditors’ investments in the property giant.
The amount is based on allegedly misstated financial statements of Evergrande for each of the financial years ended December 2017 to 2020, the company said in a stock exchange filing on Monday. Other defendants include former chief executive officer Xia Haijun, former chief financial officer Pan Darong and Hui’s ex-wife Ding Yumei, according to the filing.
The moves come six months after a Hong Kong High Court gave a winding-up order to Evergrande, which set the stage for one of China’s biggest liquidation cases. The court then appointed two managing directors of restructuring consulting firm Alvarez & Marsal Inc. As liquidators.
It symbolizes the “first formal step” for liquidators to recoup assets for creditors, said Andrew Chan at Bloomberg Intelligence. However, creditors may face a challenging path even as liquidators go after Hui and other executives, Chan cautioned.
“Hui and others could have offshore assets stashed away that couldn’t be seized onshore, and it’s unsure how much is left,” Chan said.
Hui, once Asia’s second-richest person with a $42 billion net worth, lost most of his fortune as Evergrande slid into financial distress.
The liquidators have obtained injunctions restraining Hui, Ding and Xia from dealing with, disposing of or diminishing the value of—up to prescribed limits—their assets around the world, the company said in filing. The details were previously under confidentiality orders issued by Hong Kong’s High Court, which were lifted on Aug. 2, it said.
Hui has been subject to “mandatory measures” suspecting of committing crimes since September. Bloomberg News reported that Hui was taken away by Chinese police and put under so-called residential surveillance, a type of police action that falls short of formal detention or arrest. Caixin reported that Xia and Pan, who both oversaw Evergrande’s financing businesses, have also been held since last year.
The ex-wife Evergrande’s founder Hui, Ding Yumei, holds a 5.99% stake in Evergrande shares, according to its filing in August last year. Ding has been listed as a “third party independent” since then, suggesting she and Hui separated. But it’s unclear how the two divided their fortune, and whether the wealth is significant enough to affect Evergrande’s liabilities.
In February, Ding filed a rare lawsuit against Hui’s second son, who was taken into custody last year, over HK$1 billion in loan payments.
The defendants were chased by Chinese regulators too. Onshore, China’s securities watchdog in May formally announced it would impose a 4.18 billion yuan fine on Evergrande’s onshore unit Hengda, citing the unit’s fraudulent bond issuance and violations on information disclosures.
Evergrande said the proceedings to recover assets are ongoing and there’s no certainty over any amount that may ultimately be recovered. The company’s shares will remain suspended from the Hong Kong stock exchange.
