From Breakingviews: Evergrande’s key-man risk strikes at the worst time, writes petesweeneypro
China Evergrande Group Chairman Hui Ka Yan attends a news conference on the property developer's annual results in Hong Kong, China March 28, 2017.empire weakens its already-shaky foundations. Founder Hui Ka Yan has unexpectedly stepped down as chairman of the Hengda Real Estate unit, the crown jewel which contributes to most of the listed parent’s revenue. The company claims the change was “normal” and the result of Hengda’s failure to secure a Shenzhen listing.
Investors are unconvinced it’s business as usual at the group, which is on the hook for over $46 billion in short term loans. Evergrande Property Services , where Hui’s sucessor is also general manager, tanked 9%, while other units declined by lesser degrees. Yields on one yuan-denominated Evergrande bond blasted up to 190%.
Chinese companies are often subject to “key-man risk” because authority is traditionally concentrated in the hands of the founder, who owns all the business relationships. If Hui is bailing out himself, that could complicate a much-needed restructuring.
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