Amid the chaos surrounding concerns over debt payments by Chinese real estate developer Evergrande Group, it’s good to be the chairman.
Although the 80% drop in Evergrande Group shares so far this year has made a dent in the fortunes of its billionaire founder and chairman, Hui Ka Yan will remain extraordinarily wealthy even if the company collapses under the weight of his debt of over $ 300 billion and a looming streak. bond payments that rocked the global economy this week.
Of Hui’s current estimated $ 11.5 billion fortune, TBEN calculated that $ 8 billion came from cash dividends paid to Hui since Evergrande’s 2009 IPO on the Hong Kong Stock Exchange. The real estate developer’s total liabilities have grown every year since its IPO, according to its annual reports, but it has paid a dividend every year except in 2016.
The dividends mostly went into the pocket of one man: Hui owns 10.2 billion shares of Evergrande, a 77% stake in the company. Evergrande paid dividends of 1.13 yuan per share ($ 0.17) for 2017 and 1.419 yuan per share ($ 0.22) for 2018, which generated more than $ 4 billion in revenue for Hui for those two years alone. (Dividends in Hong Kong are not taxed.) During this period, Evergrande’s debt fell from $ 179 billion to $ 243 billion. At the end of 2020, Evergrande had liabilities of $ 302 billion (1.95 billion yuan), up from $ 7.7 billion (49.9 billion yuan) in 2009 when the company went public.
“The responsibility falls more on the lenders. If lenders are aware that the use of the proceeds is intended to fund a dividend, they need to be more careful, ”says Robert Willens, corporate finance consultant. “Frequently in cases like this, a lender will ask for a guarantee from the principal shareholder. It wouldn’t be surprising to find that there was some sort of arrangement where the shareholder would be on the hook. “
Founded 25 years ago in Guangzhou, Evergrande has become China’s second-largest real estate developer in terms of sales under Hui’s leadership, behind Country Garden Holdings, but concerns over its growing debt and inability to pay interest have led to a sharp drop in its stock this year. Evergrande pushed the Chinese housing market to the brink of disaster last week when it warned banks it would not be able to repay its debts this month. The developer still owes around 1.6 million unfinished apartments to buyers who have already made down payments.
“Whether Hui Ka Yan stays in place or not is very difficult for me to say. I think Evergrande will have to sell its non-core assets and will have to cede a large part of its developments to domestic developers, ”said Anne Stevenson-Yang, co-founder of New York-based J Capital Research and expert on the Chinese market. Marlet. “What does this mean for the domestic debt of people who bought wealth management products or apartments or loaned money to Evergrande or done construction work for Evergrande or whatever? It is not something that is going to be bailed out.
Hui, now 63, grew up in poverty and studied at Wuhan University of Science and Technology. He worked as a technician in a steelworks for ten years from 1982, then launched Evergrande by buying properties at low prices. His fortune peaked at $ 36.2 billion on TBEN’ The 2019 World Billionaires List and was still at $ 27.7 billion as of March 5 on this year’s list, making him the 53rd richest person in the world.
The value of his shares has since fallen from over $ 20 billion to $ 3.5 billion, but even if it drops to zero, his dividends alone would make him one of the richest 100 people in the world. China – and richer than American billionaires like Epic Games co-founder and CEO Tim Sweeney and hedge fund mogul David Shaw. Meanwhile, The New York Times reported that Evergrande solicited loans from tens of thousands of employees to raise funds earlier this year, withholding their bonuses if they refused.
A spokesperson for Evergrande did not respond to a request for comment on dividend payments to Hui.