The Chinese real estate developer Evergrande, a symbol of the crisis in the sector that China is experiencing, has forced the resignation of its CEO and its financial director after an internal investigation implicated them in alleged irregular financing practices.
The departures of the two executives come at a time when the cash-strapped company is struggling to survive and trying to reach a restructuring deal for its estimated $300 billion in debt. Evergrande is considered the most indebted property developer in the world.
Events were precipitated when banks unexpectedly seized 13.4 billion yuan ($2 billion) in bank deposits from its real estate services unit, Evergrande Property Services, a few days ago.
According to a statement issued by Evergrande on Friday night, the money was seized by banks to use as collateral so that third parties could obtain a bank loan, which some borrowers then did not repay.
Apparently, according to the internal investigation, the funds obtained from the loan were diverted to the group through third parties and used for the general operations of the Evergrande group, according to the company.
"In view of the context, the board of directors has decided to demand the resignation" of the executives involved, including the CEO of China Evergrande Group, Xia Haijun, and the financial director, Pan Darong, said the statement, published in the website of the Hong Kong Stock Exchange, where it is listed.
Evergrande, whose founder Hui Ka Yan stepped down as chairman last year, is the poster child for China's real estate excesses, and has sought to sell assets and reduce its holdings in other companies in recent months.
For months, the markets have been watching with concern the possible bankruptcy of the group, which once had 200,000 employees, which could have disastrous consequences for the Chinese economy, with unforeseeable consequences also for the country's banking sector. The housing market accounts for 25% of Chinese GDP.
After years in which property developers relied heavily on loans to finance their development, many of them are now in dire straits as the Beijing government pushes through regulatory measures to reduce their excessive debt, which has led to a serious liquidity crisis.
Evergrande plans to present a debt restructuring plan by the end of this month, in which the sale of a large part of its assets is expected.
