Billionaire Evergrande boss breathes calm as debt risks rise

By Claire Jim

HONG KONG (Reuters) – Mingling with the powerful in celebrations to mark the centenary of the Chinese Communist Party on July 1, a beaming Hui Ka Yan showed no signs that his company, China Evergrande, was facing increasing pressure with the repayment of its debt.

Hui, dressed in a navy suit and open-necked shirt, looked relaxed as he stood on a podium overlooking the Tiananmen Square festivities, an invitation many saw as a show of support. to the billionaire businessman.

A month earlier, the president of the Evergrande group had hosted a rare meeting with over 1,000 suppliers and was once again surrounded by the business elite as he spoke about his debt reduction goals.

But now Hui’s highly leveraged business strategy is falling apart. The debts of Evergrande, the country’s second-largest developer, triggered warnings from the central bank on August 19, and regulators feared its 1.97 trillion yuan ($ 302 billion) in liabilities – the size of the Finland’s GDP – would only cause contagion if the company was not stabilized. The company warned on Tuesday of the risks of default if it did not cede more assets and renew its loans.

Evergrande and Hui did not respond to requests for comment.

The 62-year-old former steel technician, raised by his grandmother in a rural village in central Henan Province, founded Evergrande in 1996 in the southern city of Guangzhou and built his fortune on the backs of low-cost houses. price.

Under Hui, the real estate developer has grown aggressively by raising loans to support its land-buying frenzy and selling homes at lower margins for quick turnover. Evergrande has grown to reach 700 billion yuan in annual sales by 2020.

In 2017, Hui was the richest man in Asia with a net worth of $ 45.3 billion according to Forbes. Today, his net worth is estimated at $ 13.4 billion.

Hui keeps a low public profile and is a workaholic, who sometimes demands others to follow his working style, three employees told Reuters.

It has also set itself ambitious goals; Asked by investors and journalists over the past decade about his high-leverage plans, Hui said Evergrande’s high turnover and asset value was enough to cover its debts.

The story continues

POKER STROKE

Hui has not shied away from embarking on new ventures, especially to support China’s larger goals. He dabbled in electric cars and soccer, two passions of Chinese President Xi Jinping.

Outside of mainland China, Hui has mingled with Hong Kong tycoons, including late New World Development founder Cheng Yu Tung and former Chinese Estates Holdings chairman Joseph Lau.

With them, he became a vital member of the “poker club,” a tight-knit circle of tycoons who often made investment deals together, according to three people familiar with the club.

“He was very calm when he was first brought to the club; he knowingly lost a lot of money in matches and won Cheng’s affection,” said one of the people told by the tycoons. .

Cheng injected $ 150 million into Evergrande a year before its 2009 IPO in Hong Kong, helping it through a slump during the financial crisis following aggressive expansion, according to Evergrande’s listing prospectus.

Chinese Estates have disclosed investments over the years amounting to billions of dollars in stocks and bonds from Evergrande – the largest dollar bond issuer in Asia. Chinese Estates did not respond to a request for comment.

Hui’s highly leveraged businesses are worrying regulators who have warned Evergande to tidy up his house.

“He did everything right politically, but he also raised so much debt – in an industry where the government has warned against excessive borrowing and excessive speculation,” said one analyst who declined to be identified because he is not authorized to speak to the media.

Speaking at the 2018 China Charity Awards as the winner for the 8th consecutive year, Hui said that Evergrande has paid taxes totaling 185 billion yuan in the past 22 years and donated over 10 billion yuan. .

“Without the country’s policy to reform higher education, I would not have been able to leave the village. Without the country granting me a scholarship of 14 yuan per month, I would not have been able to complete my university studies, ”Hui said.

“Without the right policy of reform and opening up of the country, Evergrande would not have what it has today. Therefore, all that Evergrande and I have, they are all given by the Party, by the country and by society. “

($ 1 = 6.4678 Chinese yuan)

($ 1 = 7.7874 Hong Kong dollars)

(Edited by Anne Marie Roantree and Jacqueline Wong)