There is no way to redeem about 30 billion yuan in wealth management, and many people from Evergrande Wealth have been arrested

Release time:Apr 16, 2024 21:30 PM

Introduction: The thunder of Evergrande Wealth's high interest financing has finally affected the management of the company.

Author | Zhang Huimin from First Financial

On the evening of September 16th, the Nanshan Branch of Shenzhen Public Security Bureau issued a case notice, stating that recently, the public security organs have taken criminal coercive measures against suspected criminals such as Du from Evergrande Financial Wealth Management Co., Ltd. in accordance with the law. Investors can register their cases through WeChat official account, telephone, SMS, mail, etc. The registered information includes investment platform, investment amount, and amount to be cashed.

An investor from Evergrande Wealth told First Financial that "the redemption of funds stopped in August this year, and the account could no longer be logged in. The complaint group had disappeared two years ago. After the Nanshan District Public Security Bureau issued a case notice yesterday, investors were all relaying information to each other." The reporter noticed that the official website of Evergrande Wealth could no longer be opened, and except for the account login page, the other pages of the Evergrande Wealth mobile app were "completely blank".

On August 31 of this year, Evergrande Wealth released an open letter to investors on its official WeChat official account, saying that because the company's asset disposal progress was not as expected, it did not receive asset disposal funds and could not carry out the cash payment in the current month. Subsequent payment arrangements will be announced separately.

On May 31 earlier, Evergrande Wealth stated that since September 2021, it has made every effort to promote asset disposal and raise funds for redemption, completing a total of 20 redemption periods. However, due to the unsatisfactory situation of fund recovery, there was insufficient available redemption funds in May, which could not be redeemed according to the original standards.

According to public information, Evergrande Wealth was established in 2015 with a registered capital of 1 billion yuan and registered in Qianhai Shenzhen Hong Kong Cooperation Zone, Shenzhen. The legal representative and executive director are Du Liang.

According to the announcement released by Evergrande Group on August 21 this year, Evergrande Wealth is an indirect wholly-owned subsidiary of Evergrande Group. In order to meet the funding needs of each subsidiary of Evergrande Group, Evergrande Wealth has launched multiple fixed term financing products. The funds raised will ultimately be invested, borrowed, and discounted through investment methods for the project companies on Evergrande Group's balance sheet, and invested in Evergrande bonds.

In the announcement, Evergrande Group stated that in August 2021, due to difficulties in redemption, the sale of fixed financing products to the outside world was completely suspended, and the total amount of funds raised for fixed financing products was about 92.1 billion yuan.

It is worth noting that Evergrande Group is the credit enhancing party of the above-mentioned fixed financing products, and its two subsidiaries have provided credit enhancement guarantees for the fixed financing products, providing a full, unconditional and irrevocable obligation to make up for the shortfall of the fixed financing products that have not been fully paid on time. As of December 31, 2021 and December 31, 2022, the outstanding principal and interest of Evergrande Wealth were approximately RMB 41 billion and RMB 34 billion, respectively.

The announcement mentions that the funds raised by Evergrande Wealth have ultimately fully flowed into the Evergrande Group system, and the wealth management products it issues belong to the potential off balance sheet liabilities of Evergrande Group.

Zheng Boen, a lawyer from Guangdong Zhiheng Law Firm, told First Financial that compulsory measures are a method by which the state forcibly deprives or restricts the personal freedom of defendants, current offenders, major suspects, and specific individuals in accordance with legal provisions in order to maintain social security and ensure the smooth progress of investigation and trial work. Taking compulsory measures means that Du and others may be suspected of criminal offenses and may be subsequently sentenced.

In addition, Zheng Bowen said that the opening of multiple channels for reporting cases by public security organs is conducive to starting the victim's reimbursement procedure, and is also conducive to the statistics of the amount of suspect suspected of committing crimes.

Bai Wenxi, Vice Chairman of the China Enterprise Capital Alliance and Chief Economist of IPG China, told First Financial that as a subsidiary of Evergrande Group, the guarantor of Evergrande Wealth's wealth management products is also Evergrande Group. This means that Evergrande Group may need to bear joint and several liability for repayment of Evergrande Wealth's wealth management products, but the specific situation depends on the legal relationship between Evergrande Group and Du, as well as their contractual agreements.

Bai Wenxi stated that generally speaking, for debt repayment in bankruptcy proceedings, there will be a predetermined legal order of repayment. The priority order of repayment is usually bankruptcy expenses and common interest debts, buyer's rights, outstanding construction project payments, collateral rights set by banks and other financing institutions, wages and taxes, followed by ordinary debt, which includes debt that has not been mortgaged with property rights.

"In the case of Evergrande Group, if Du is taken compulsory measures, he may not be able to continue to fulfill his repayment responsibility to Evergrande Wealth, which will result in Evergrande Wealth's investor debt being classified as ordinary debt. However, he also stated that the above is only a general repayment order, and the specific situation may vary due to national and regional legal provisions and specific contract agreements.".

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