China Evergrande C.E.O. Resigns After Loans Come Under Scrutiny
China Evergrande, the embattled Chinese property developer, said late Friday that its chief executive had resigned, the latest setback for the company as it struggles to manage its crushing $300 billion in debt.
In an announcement, the company said the chief executive, Xia Haijun, had resigned over his involvement in a plan to funnel $2 billion into Evergrande’s coffers from one of its subsidiaries.
A preliminary investigation found that the funds, belonging to Evergrande Property Services, had been used as collateral to guarantee a series of loans, money that was then diverted to Evergrande through a third party, the company said.
When the loans were not repaid late last year, banks seized the $2 billion from the property management unit. In March, Evergrande delayed the filing of its annual results, saying that it needed to investigate why banks had claimed the funds from Evergrande Property Services.
Evergrande, which did not identify the third party that facilitated the loans, said the funds were used for “general operations,” but it did not elaborate.
China Evergrande said it had asked Mr. Xia and Pan Darong, its chief financial officer, to resign over their involvement in the plan, along with one other executive. Evergrande did not specify what role the executives had played, but it said that Mr. Xia and Mr. Pan had “no disagreement” with the board of directors over the resignations.
Evergrande has said that it will announce a restructuring plan later this month. Once China’s biggest property developer, the firm has struggled to pay down debts of more than $300 billion to creditors after the government forced debt-laden real estate firms to curb borrowing, hampering the company’s ability to pay suppliers and finish projects. The company went into default in December.
The debt problems facing Evergrande have spread to other overextended property developers in China, fueling concerns about a potential housing crisis that could threaten an already fragile economy. Evergrande said it had appointed Siu Shawn, an executive director at the company, to take over as chief executive. It named Qian Cheng as its new chief financial officer.
An independent committee investigating the $2 billion from Evergrande Property Services is expected to complete its work and issue a report as soon as possible. Evergrande also said it was working out a repayment plan with the subsidiary, and that it was considering appointing a consultant to perform a review of its internal controls and risk management.
Claire Fu contributed research.