China Evergrande, the struggling Chinese property developer, said Friday night that its chief executive had quit, the latest setback for the company as it struggles to manage its crippling $300 billion debt.
In an announcement, the company said chief executive Xia Haijun resigned over his involvement in a plan to funnel $2 billion into Evergrande’s coffers from one of its subsidiaries.
A preliminary investigation revealed that the funds, belonging to Evergrande Property Services, had been used as collateral to secure a series of loans, money which was then diverted to Evergrande through a third party, the court said. society.
When the loans failed to be repaid late last year, the banks seized the $2 billion from the property management unit. In March, Evergrande delayed filing its annual results, saying it needed to investigate why the banks claimed the funds from Evergrande Property Services.
Evergrande, which did not identify the third party who facilitated the loans, said the funds were used for “general operations” but did not elaborate.
China Evergrande said it asked Mr. Xia and Pan Darong, its chief financial officer, to resign over their involvement in the plan, along with another executive. Evergrande did not specify what role the executives played, but said Mr. Xia and Mr. Pan had “no disagreement” with the board over the resignations.
Evergrande said it would announce a restructuring plan later this month. Once China’s largest property developer, the company has struggled to repay more than $300 billion in debt to creditors after the government forced indebted property companies to cut borrowing, hampering the company’s ability pay its suppliers and complete its projects. The company defaulted in December.
The debt problems facing Evergrande have spread to other overstretched property developers in China, fueling concerns about a possible housing crisis that could threaten an already fragile economy. Evergrande said it named Siu Shawn, the company’s chief executive, to take over as chief executive. He appointed Qian Cheng as the new CFO.
An independent panel investigating Evergrande Property Services’ $2 billion is expected to complete its work and issue a report as soon as possible. Evergrande also said it was developing a repayment plan with the subsidiary and considering appointing a consultant to conduct a review of its internal controls and risk management.
Claire Crazy contributed to the research.