Newsmaker: Evergrande's billionaire boss exudes calm as debt risks grow

Chinese Estates Holdings

01/09/2021 11:30

By Clare Jim
    HONG KONG, Sept 1 (Reuters) - Mingling with power brokers at
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  3333.HK , was facing mounting
pressure with debt repayments.
    Hui, wearing a navy-blue suit and open-neck shirt, looked
relaxed as he stood on a podium overlooking the festivities in
Tiananmen Square, an invitation many considered a show of
support for the billionaire businessman.   
    A month earlier, the Evergrande group chairman had hosted a
rare meeting with more than 1,000 suppliers and was once again
flanked by the business elite, as he spoke of his deleveraging
goals.
    But now Hui's highly leveraged business strategy is
unravelling. Debts at Evergrande, the country's No. 2 developer,
triggered warnings on Aug. 19 from the central bank and
regulators worried that its 1.97 trillion yuan ($302 billion) of
liabilities - the size of Finland's GDP - could result in
contagion if the company was not stabilised.  urn:newsml:reuters.com:*:nL4N2PU2HD
    The company warned on Tuesday of default risks if it failed
to dispose of more assets and renew loans.  urn:newsml:reuters.com:*:nL1N2Q20M2
    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 southern Guangzhou city and built
his fortune on the back of low-priced homes.
    Under Hui, the property developer expanded aggressively by
raising loans to support its land buying sprees and selling
homes at lower margins for quick turnover. Evergrande grew to
achieve 700 billion yuan in annual sales by 2020.
    In 2017, Hui was Asia's richest man 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 at
times demands that others follow his work style, three employees
told Reuters.
    He also set ambitious targets; when questioned by investors
and reporters in the past decade about his highly leveraged
projects, Hui said that Evergrande's high turnover and asset
value were sufficient to cover its debts.
    
    POKER PALS
    Hui did not shy away from new ventures, especially in
support of China's larger goals. He dabbled in electric cars and
soccer, both a passion of Chinese President Xi Jinping.
    Outside mainland China, Hui mixed with Hong Kong tycoons
including New World Development's  0017.HK  late founder, Cheng
Yu Tung, and Chinese Estates Holdings'  0127.HK  former
chairman, Joseph Lau. 
    With them, he became a core member of the "poker club", a
tight-knit circle of tycoons who often did investment deals
together, according to three people familiar with the club. 
    "He was very composed when he was first brought to the club;
he knowingly lost a lot of money in the games and gained the
fondness of Cheng," one of the people briefed by the tycoons
said.
    Cheng injected $150 million into Evergrande a year before
its 2009 IPO in Hong Kong, helping it through a crunch during
the financial crisis following aggressive expansion, according
to Evergrande's listing prospectus. 
    Chinese Estates has disclosed investments over the years
amounting to billions of dollars in the shares and bonds of
Evergrande - the largest issuer of dollar junk bonds 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 get its house in order.
    "He's done everything correct politically but he has also
raised so much debt - in an industry the government has warned
against excessive borrowing and over speculation," said an
analyst who declined to be identified as they are not authorised
to speak to media.
    Speaking at the 2018 China Charity Awards as a winner for
the 8th consecutive year, Hui said Evergrande had paid tax
totalling 185 billion yuan in the past 22 years and donated more
than 10 billion yuan.
    "Without the country's policy to reform higher education, I
could not have left the village. Without the country giving me a
scholarship of 14 yuan every month, I could not have completed
university," Hui said.
    "Without the country's good policy to reform and open up,
Evergrande would not have what it has today. Therefore,
everything 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)

 (Editing by Anne Marie Roantree and Jacqueline Wong)
 ((clare.jim@thomsonreuters.com; +852 2912 6653; Reuters
Messaging: clare.jim.thomsonreuters.com@reuters.net))