Beleaguered Billionaire Hui Ka Yan Struggles To Hold Onto His Crumbling Empire

Once China’s richest person, Hui falls out of the top 100 for the first time in 14 years.

Hui Ka Yan, the founder of real estate firm China Evergrande Group, has lost nearly all of his once massive fortune. Worth $42.5 billion and ranked the richest person in Asia at his peak in 2017, his wealth has been drastically diminished as debt woes plague the embattled developer. Yet as pressure mounts for the former tycoon to find a concrete way to repay his firm’s debts, analysts say he will certainly lose a lot more.

The 64-year-old, who dropped out of the 2022 ranks of China’s top 100 richest for the first time since his 2007 debut, now has an estimated net worth of $2.9 billion, an amount that is based entirely on the dividends he’s received over the years, though some of it has since been plowed into mansions, jets and a yacht. The number excludes Hui’s 60% stake in Evergrande, whose shares were suspended from trading in March, and still can’t meet the criteria for a resumption. Even before the suspension, the firm had lost about 95% of its peak value.

But even his personal assets are not safe from the firm’s creditors. Hui was forced to use $1 billion of his own cash to pay down Evergrande debt late last year earlier this year, and he sold earlier this year two luxury apartments at a discount–one in the city of Shenzhen and one in Guangzhou–for a combined $50 million (360 million yuan), apparently to help pay off more.

As Evergrande struggles to come up with a plan for restructuring its more than $300 billion in liabilities, which according to one person with knowledge of the matter will probably get delayed again and pushed out into 2023 due to the sheer size and complexity of the matter, more of his remaining trophy assets are likely at risk. Chen Zhiwu, a professor of finance at the University of Hong Kong, says amid China’s drastically changed political environment, the pressure is “really high, if not higher” for Hui to keep paying down corporate liabilities with his own money.

In fact, one of his three homes in Hong Kong’s prestigious The Peak neighborhood was seized by China Construction Bank (Asia) last week in November after Evergrande defaulted on a loan collateralized by the $90 million (estimated market value) property.

“Of course, he would like his personal assets and corporate assets very clearly separated, which officials aren’t willing to accept,” Chen says. “What this means is that when his company debt is in default, some of his personal fortune may have to be used to contribute to the payments to debt holders.”

Hui, who according to Evergrandethe company’s website is still a member of the ruling Communist Party, has pledged his two other luxury homes in the same posh Hong Kong locale as collateral for loans from Orix Asia Capital. He is also looking to sell his 45-room Knightsbridge mansion overlooking London’s Hyde Park area, two years after buying it from a Saudi prince for $232 million. And he owns private jets and a $60 million superyacht that he could be forced to sell.

As Evergrande’s revenues have fallen off a cliff (it only recorded $2.5 billion in contracted sales during the first eight months of the year, a plunge of around 96% from the prior year), Hui is unlikely to convince creditors that the company could ever generate enough cash flow for future repayment.

Of course, he would like his personal assets and corporate assets very clearly separated, which officials aren’t willing to accept.

Meanwhile, a nationwide mortgage boycott by angry buyers, who paid for their purchases in full but aren’t getting apartment complexes delivered on time after troubled developers such as Evergrande ran out of money, is putting pressure on the government. To quell public protests, which are rare in China, officials have agreed to issue special loans totaling $27.6 billion (200 billion yuan) to help with this type of work. Victor Shih, an associate professor of political economy at the University of California, San Diego, says banks are likely to have been told to lend to the financing arms of local governments, so that they could buy the unfinished projects from distressed real estate firms at a small discount. Evergrande said in September it had resumed working on 95% of its 706 pre-sold but undelivered construction projects.

But aside from protecting the interests of average homebuyers, few expect Beijing to reverse its course and unveil broader sector bailout measures–which are seen as crucial to restoring offshore creditor confidence. Kaven Tsang, a Hong Kong-based senior vice president at Moody’s Investors Service, says the economic pain inflicted by the real estate meltdown–including defaults, falling sales and rapidly slowing growth–are “within the [government’s] tolerance level.”

“The central government has made it clear in the past that they aren’t going to use the property sector to support the economy,” says Tsang. “We haven’t seen any changes so far.”

Ron Thompson, a Hong Kong-based managing director at consulting firm Alvarez & Marsal Asia, says he thinks it would take at least two years for China’s housing demand to stabilize. Moody’s estimated in October that China’s property sales would continue to decline over the next 12 months, after shrinking 21% in August from the prior year, and 15.3% in September. Default risk remains high, given that the country’s developers have at least a combined $55 billion in bonds due over the next two years, but face weaker sales and limited refinancing options.

Amid this environment, bond investors mired in the restructuring of defaulted developers “aren’t expecting 100 cents on the dollar,” and are likely to demand equity and other collaterals to compensate for their rising losses, says Alvarez & Marsal Asia’s Thompson. Those who have lent specifically to Hui are increasingly taking things into their own hands, with more asset seizures and “wind-up” petitions to liquidate assets due to unpaid financial obligations, says Brock Silvers, a Hong Kong-based chief investment officer at Kaiyuan Capital, which invests in distressed assets.

Evergrande is facing a wind-up hearing in Hong Kong on Nov. 28, which was first brought in June by creditor and Samoa-based investment holding Top Shine Global Limited over $110 million in unspecified financial obligations.

Evergrande’s Hong Kong headquarters, which it acquired for $1.6 billion (HK$12.5 billion) in 2015 from Chinese Estates Holdings, controlled by Hui’s billionaire friend Joseph Lau, has also been seized by creditors and recently put on sale. The 26-story China Evergrande Centre located in Wan Chai now has an estimated value of around $1 billion, and the bidding process, concluded in late October reportedly drew interest from billionaire Li Ka-shing’s CK Asset Holdings.

Hui appears to be pinning his last hope on electric cars. The Hong Kong-listed China Evergrande New Energy Vehicle Group , two thirds owned by parent Evergrande and whose trading has also been suspended since March, announced in late October that it had delivered the $24,700 Hengchi 5 electric sports utility vehicle to the first batch of 100 buyers, constituting a “major milestone” for Hengchi Auto. Parent company Evergrande also said in a July filing that it may offer equity interests in its EV unit as part of a “supplemental credit enhancement” package for restructuring offshore debt.

But Shen Meng, managing director at Beijing-based boutique investment bank Chanson & Co., says the EV deliveries offer little comfort to creditors. The beleaguered Hui, who once cherished ambitions to become the Elon Musk of China and propel Evergrande above Tesla, still has a long way to go before establishing Hengchi as a stable brand.

“The deliveries of the first batch doesn’t mean the maturing of Evergrande’s EV business, as it will take quite some effort to start bigger-scale production and delivery to the mass,” says Shen. “The EV unit is unlikely to be seen as a reliable asset, and it won’t help much with the restructuring process.”