China Evergrande: key executive at EV unit arrested for unspecified crimes, 3 months after founder Hui Ka-yan’s detention

China Evergrande: key executive at EV unit arrested for unspecified crimes, 3 months after founder Hui Ka-yan’s detention

08 Jan China Evergrande: key executive at EV unit arrested for unspecified crimes, 3 months after founder Hui Ka-yan’s detention

Posted at 10:00h in Asia by

Chinese authorities arrested a key executive from the troubled China Evergrande Group for unspecified crimes, more than three months after detaining the group founder Hui Ka-yan, presenting another major hurdle to its debt reorganisation.

Liu Yongzhuo, an executive director at China Evergrande New Energy Vehicle Group, “has been detained in accordance with the law on suspicion of crimes,” the company said in a Hong Kong stock exchange filing on Monday, without elaborating. China Evergrande owned 58.5 per cent of the new energy vehicle (NEV) producer at the end of 2022, according to its latest annual report.

The stock sank as much as 23 per cent after the disclosure, before closing 6 per cent lower at HK$0.39. The stock slumped 84 per cent in 2023, bringing the cumulative decline in market value to HK$4.23 billion (US$541.8 million) over the past five years.

Liu Yongzhuo, seen in a June 11, 2012 file picture when he was the general manager of Guangzhou Evergrande football club. Photo: AFP

Liu, 42, joined the Evergrande group in December 2003 and was made chairman of Evergrande Football Club, Evergrande Spring Water Group and Evergrande High-Tech Group, according to the NEV maker’s 2022 annual report. He had 21.7 million shares, or a 0.22 per cent stake, and stock options in the company.

Liu has more than 20 years’ experience in real estate project investment and operation, sports operation and corporate operational management in various industries, it added.

‘Tiger hunt’: China’s war on corruption sees record purge of senior officials

China placed Evergrande’s billionaire founder and chairman Hui under “mandatory measures” in late September last year, also on unspecified crimes, a development that eventually scuttled an agreement with offshore creditors to reorganise some US$20 billion of defaulted debts.
The two arrests, plus other executives in its wealth management group, came amid China’s biggest crackdown on corruption since 2013. The Communist Party’s Central Commission for Discipline Inspection nabbed a record 45 senior officials last year, the most since President Xi Jinping launched his anti- corruption purge in 2013.

How Hui Ka-yan plans to rescue Evergrande from China’s corporate graveyard

Evergrande said its restructuring support agreements, signed in April 2023, with various classes of creditors, lapsed on December 15. The developer also fought a winding-up petition in a Hong Kong court to avoid liquidation, and the hearing was last month adjourned to January 29.

The troubled developer had 2.39 trillion yuan (US$330 billion) of liabilities and only 13.38 billion yuan of cash on hand as of June 30, according to its latest published accounts. The developer had proposed to repay offshore creditors with instruments that could be converted into equity stakes in the NEV subsidiary.

The group had faced multiple hurdles to get its house in order, including a regulatory decision in September that prevented it from issuing new bonds – a key plank in the restructuring plan – as a form of debt repayment after its onshore real estate unit Hengda was probed for illegal activities.

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