Wealthy friends who helped the Evergrande tycoon count their losses

Hui had long relied on his poker friends to support China Evergrande Group during times of turmoil, whether by buying shares in his company, buying back bonds, or failing to repay debts. He expanded that circle to raise funds for his real estate services business in December, as well as an electric vehicle startup in January.

The abrupt reversal in the actions of Evergrande and his units means that Hui’s friends now face potentially punitive losses. The promoter’s shares have fallen around 70% this year, while Evergrande Property Services Group Ltd. is 34% lower than its initial public offering price.

Strategic investors who spent a total of $ 3.4 billion to buy shares in the China Evergrande New Energy Vehicle group when it was placed in January saw the value of their investments fall by more than 70%. They were unable to sell due to a lock-up agreement. Evergrande sold an additional $ 1.4 billion of shares on the open market in May to undisclosed investors.

Concern that the company will have to sell assets at a very high price is fueling the decline of its listed subsidiaries. The world’s most indebted developer has total liabilities of $ 300 billion.

Here’s a look at the current situation for some Evergrande investors:

NEV unit

In January, Hui sold HK $ 26 billion ($ 3.4 billion) of shares in Evergrande’s green car unit to six investors, subject to a 12-month lock-up period. The placement, which came amid a global craze for electric vehicle makers and booming stock markets, helped trigger a rally of more than 50% in equities the day after the news broke. Investors bought the shares at HK $ 27.30 each. They closed at HK $ 6.50 on Friday.

The six are:

• Chen Hua, the chairman of Kingkey Group, who personally invested HK $ 5 billion in the EV startup via a unit, according to a file.
• Wong Kwong Miu, who controls the mainland-listed Shenzhen Centralcon Investment Holding Co., also personally invested HK $ 5 billion through a unit.
• Liu Ming Hui, chairman of China Gas Holdings Ltd., invested HK $ 3 billion.
• Wang Zhongming’s Shenzhen Greenwoods Investment Group has invested $ 5 billion.
• Chan Hoi-wan, CEO of Chinese Estates Holdings Ltd. and wife of Hong Kong billionaire Joseph Lau, invested HK $ 3 billion.
• Wang Kaiguo invested HK $ 5 billion through Heyirong International Trade Co.

Real Estate Services IPO

Evergrande’s property management arm raised HK $ 14.3 billion when it went public in Hong Kong in November, with prices in the lower half of its marketed range. The offering included an impressive number of 23 key investors. While these investors were allowed to sell after June 2, other stakeholders will be locked out until December 2.

Three of the strategic investors in the NEV placement were also key investors in the real estate services unit, according to documents and termsheets viewed by Bloomberg. Chan of Chinese Estates was the biggest funder of the pre-listing round, buying 5% of the shares, while Kingkey bought HK $ 236 million. The controlling founder of Centralcon Group has made an investment of HK $ 200 million.

Friends of poker

Some of Hui’s closest allies are in a group with whom he shares a fondness for a Chinese poker game. Known as the Big Two Club for the name of the game, the clan includes Lau from Chinese Estates, Henry Cheng from New World Development Co., and Cheung Chung Kiu from CC Land. They have done many transactions over the years and are so interconnected that any default by Evergrande would impact their businesses.

• Chinese Estates suffered a loss in the first half of the year due to declining income from Evergrande, which reduced its annual dividend in March and then decided not to make a special payment. The paper loss of its holdings of Evergrande shares amounted to HK $ 4.11 billion. Chinese Estates shares are trading near their lowest level since 2004.
• China Strategic Holdings Ltd., an investment firm backed by New World’s Cheng, said in a statement Friday that it held 133.6 million China Evergrande NEV shares. Based on the electric vehicle maker’s last closing price, its stake is around HK $ 868 million, compared to an investment value of HK $ 3.9 billion. China Strategic also sold Evergrande bonds for a loss of $ 4.7 million, according to an Aug. 24 statement.
• CC Land said in its interim report that its stake in the Evergrande electric vehicle unit was worth more than 5% of its total assets, its largest investment by this measure.

Fallout from the sun

Billionaire Zhang Jindong lost control of the retail arm of his Suning empire when he received a state-backed bailout in July. Concerns about his group’s cash flow erupted in September, when Zhang waived his right to a 20 billion yuan payment from Evergrande. The move helped his friend Hui save his own business, but made little financial sense to investors.

Support in Shenzhen

It’s not just rich people who feel the pain. Shenzhen Investment Ltd., a listed real estate developer controlled by the Shenzhen government, said the value of its Hengda Real Estate Group Ltd. had fallen by around HK $ 833 million in the first half. As of June 30, the stake was worth about 4% of its total assets, according to a statement on the Hong Kong Stock Exchange.

Bond buyer

Asia Orient Holdings Ltd., headed by secret tycoon Poon Jing, revealed in July that it had amassed Evergrande bonds with a face value of $ 1 billion, according to a swap document, including bonds bought for $ 230 million. dollars in the past year. At the time of the announcement, Poon’s company and its subsidiaries were sitting on unrealized losses on disclosed holdings, as Evergrande bonds were trading near their all-time lows, according to data compiled by Bloomberg.

This story was posted from an agency feed with no text editing.