2024-08-05
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NetEase Finance, August 5thChina Evergrande announced on the Hong Kong Stock Exchange on the evening of August 5 that on March 22, 2024,Winding upIn the Hong Kong Special Administrative Region, a person registers in the name of a companyHigh Court(High Court) commenced legal proceedings against three defendants, namelyXu Jiayin, former CEO of the companyXia HaijunThe lawsuit grew to include four other defendants: Xu's spouse or former spouse, Ding Yumei, and three entities affiliated with Xu and Ding.
In the lawsuit, the Company seeks to recover from the seven defendants, among other things, approximately $6 billion in dividends and compensation paid by the Company based on financial statements it claims were misstated for the fiscal years ended December 31, 2017 through December 31, 2020.
The liquidator (on behalf of the company) obtained a number ofInjunction, restricting Xu Jiayin, Ding Yumei and Xia Haijun from disposing, selling or reducing the value of their global assets by more than the relevant prescribed limits. The injunctions were first issued in Hong Kong on June 24, 2024 against Xu Jiayin and Xia Haijun, and gradually developed to include Ding Yumei. The writs related to the action and the Hong Kong injunctions were previously subject to a confidentiality order issued by the Hong Kong High Court, which was lifted on August 2, 2024.
The legal proceedings in this lawsuit are ongoing and there is currently uncertainty as to the likelihood of a successful claim and the amount that the Company may ultimately recover. The Liquidators will publish further announcements on the above matters in due course in accordance with the requirements of the Listing Rules.
Trading in the shares has been suspended from 10:18 a.m. on Monday, January 29, 2024, and will remain suspended until further notice.
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Produced by｜Qingliu Studio
Author: Wang Xiaoyue, Xie Yiwen Editor: Zhao Yan
In recent years, the real estate industry has been plagued by landmines, and suppliers, home buyers, and shareholders who rely on the real estate industry for survival have all been implicated in the minefield. However, there are also a small number of people who were at least once very wealthy and made a lot of money.
Qingliu Studio statistics found that those who passedIPOAfter the funds obtained from financing, rights issue and bank loans flow into listed companies, at least part of the funds are transformed into large dividends, high salaries, etc., and flow into the pockets of major shareholders and senior executives of real estate companies.
Qingliu Studio ranked private real estate companies by their total debt in 2022. The top ten are: China Evergrande, Country Garden, Vanke, Sunac China, Longfor Group, Shimao Group, China Fortune Land Development, Sunac China Holdings, Gemdale Group and R&F Group. Except for Vanke, Longfor Group and Gemdale Group, the rest of the real estate companies have officially gone bankrupt, with Evergrande being the most typical representative with a debt of over 2 trillion yuan.
But before these real estate companies went bankrupt, the industry was thriving, with dividends of tens of billions of yuan a year being common. The equity of most of the top real estate companies is very concentrated, with major shareholders holding more than 70% of the shares. In other words, most of these dividends of tens of billions of yuan actually go into the pockets of individual bosses.
That’s not all.
Qingliu Studio noted that, taking Evergrande as an example, while distributing 10 billion yuan in dividends, the company also turned around and issued high-interest dollar bonds to Xu Jiayin, with an annual interest rate of up to 13%. In other words, no matter how small a fly is, it is still meat. After the boss took the dividends, he turned around and used the capital to "eat" the high interest of the bonds. Companies such as R&F also paid large dividends and issued dollar bonds to shareholders or senior management at the same time.
The boss eats the meat, and the senior management follows suit. The senior management of the leading real estate companies saw their annual salaries soar around 2020, from the original "million-dollar annual salary" to over 100 million yuan. Combined with the dividends received from equity incentives and the cash raised from stock reductions, a large number of "workers" have achieved financial freedom in just a few years.
However, when real estate companies collapsed, these senior executives were the first to leave, leaving a mess behind.
Huge debt, huge dividends
Among the top ten sample companies in terms of total debt selected by Qingliu Studio, all listed in RMB, Evergrande topped the list with a total debt of 2.44 trillion yuan. The other three real estate companies with debts exceeding one trillion yuan are Country Garden with a total debt of 1.43 trillion yuan, Vanke with a total debt of 1.35 trillion yuan and Sunac with a total debt of 1 trillion yuan.
Longfor Group and Shimao Group have total debts of about 550 billion yuan and 530 billion yuan respectively, ranking fifth and sixth on the debt list. China Fortune Land Development and Sunac China Holdings ranked seventh and eighth with 380 billion yuan and 370 billion yuan respectively, while Gemdale Group and R&F Group both ranked in the top ten with total debts of 300 billion yuan.
However, the liabilities of real estate companies are divided into interest-bearing liabilities and interest-free liabilities. Interest-bearing liabilities refer to liabilities among corporate liabilities that require interest payments, such as bank loans or issued bonds; interest-free liabilities refer to liabilities that do not require interest payments. Payables for land, payables to suppliers, and advance payments to customers are all interest-free liabilities. Taking Longfor as an example, of the total liabilities of more than 550 billion yuan in 2022, the total amount of interest-bearing liabilities exceeds 200 billion yuan, which means that more than 300 billion yuan is interest-free debt.
In addition to the huge debt, some real estate companies have conducted two rounds of financing, namely IPO and rights issue. Among them, Country Garden raised the most in IPO, about RMB 12.4 billion, and then raised HKD 55.765 billion, about RMB 48 billion, through rights issue. Sunac's IPO amount was not large, but after listing, it raised about RMB 20 billion through rights issue.
High total debt and capital market financing are huge sources of funds for these real estate companies. These funds obtained from various sources are ultimately used to acquire land, build houses, pay salaries, pay suppliers, etc. However, another huge destination for funds is shareholder dividends, and the biggest beneficiaries of shareholder dividends are real estate bosses who hold shares in listed companies.
According to statistics from Qingliu Studio, the Xu Jiayin family ranks first in terms of the amount of dividends received by major shareholders. Since its listing in 2009, China Evergrande has distributed a total of 73.386 billion yuan in dividends. Xu Jiayin and his wife have controlled about 70% of China Evergrande's shares for many years, and may have taken away more than 50 billion yuan in total, accounting for 68.54%.
The Yang Guoqiang family also received more than 40 billion yuan in dividends from listed companies, ranking second. The company went public in 2007 and has distributed 74.723 billion yuan in dividends so far. The Yang family holds about 60% of the shares all year round, and has received a total of about 42 billion yuan in dividends, accounting for 56.23% of the total dividends.
In fact, Vanke, which has been listed for the longest time, has implemented the largest cumulative dividend amount, with a total of about 103 billion yuan.
Even if we add up the dividends received by the four former major shareholders, namely China Resources, the current major shareholder Shenzhen Metro, and the two main players in the Baowan dispute, Baoneng Group and Vanke Enterprise Center, the total amount is less than RMB 40 billion. This amount is not as much as the dividends received by the Yang family and Xu Jiayin and his wife from their own companies over the years.
Another pair of real estate bosses who received high dividends from listed companies areWu Yajunand her ex-husband Cai Kui. Longfor Group only started paying large dividends in 2020, and the average annual dividends exceeded HK$10 billion for two consecutive years. Wu Yajun holds about 43% of the shares, while her ex-husband Cai Kui holds about 23%. The cumulative dividends received by the two are nearly 37 billion yuan. However, in 2021 and 2022, Longfor began to implement "stock-for-dividends", with major shareholders increasing their holdings of stocks instead of receiving cash dividends, involving an amount of about 10 billion, in order to stabilize cash flow and capital.
In addition, the Xu family of Shimao Group received a total dividend of more than 20 billion yuan, and Li Silian and Zhang Li of R&F Properties each received a total dividend of more than 10 billion yuan.Sun HongbinThe cumulative amount of dividends received also exceeded the 10 billion threshold.
According to statistics from Qingliu Studio, from 2017 to the eve of the large-scale bankruptcy of real estate companies in 2020, these four years were the period with the highest dividend levels for real estate companies.
Vanke A has distributed dividends of tens of billions of yuan for five consecutive years from 2017 to 2021. Shenzhen Metro, the major shareholder of Vanke, happened to take over in 2017 and became the biggest beneficiary of this period of high dividends. Baoneng and its concerted actors, which briefly stayed on the shareholder list due to the "Baowan dispute" that year, also happened to catch up with the peak period of Vanke A's dividends in the past two years, and the total dividends they received may be close to 9 billion yuan.
Country Garden also distributed dividends of 10 billion yuan for three consecutive years from 2017 to 2020. Country Garden Services began to distribute dividends after its listing in 2018. So far, the Yang family has received a total of HK$1.8 billion from Country Garden Services, equivalent to more than RMB 1.5 billion.
In 2017, China Evergrande's dividends exceeded HK$10 billion for the first time, reaching HK$16.636 billion. In 2018, the dividends were close to the 20 billion mark. According to the shareholding ratio at the end of that year, Xu Jiayin and his wife received a dividend of 15.3 billion yuan, equivalent to more than 13 billion yuan.
Wu Guangzheng, chairman of Wharf Holdings, reaped the benefits of Wu Yajun's success. He started to invest in Longfor in 2012 and has maintained a 6% to 7% stake for many years. Wu Guangzheng may have received a total of HK$3.8 billion in dividends from Longfor.
However, some people were attracted by the dividends and ended up losing money. After Evergrande's dividends exceeded 10 billion in 2017, Hong Kong tycoon Liu Luanxiong bought Evergrande shares in 2018. By the end of 2018, Liu Luanxiong and his wife held 8.94% of China Evergrande's shares. The dividend amount of China Evergrande in 2018 broke a new record again, reaching 19.751 billion Hong Kong dollars, of which 1.766 billion yuan may have been distributed to new shareholders Liu Luanxiong and his wife.
China Evergrande's annual dividend in 2019 was still close to HK$10 billion, but the dividend in 2020 suddenly dropped to HK$2.4 billion. Then the group collapsed and the 2021 annual report was difficult to produce, making it even more difficult to talk about dividends. Liu Luanxiong, who bought shares at a high point, was also hit hard by the collapse of Evergrande. The Evergrande shares he bought at a high price plummeted overnight, and he eventually exited the market with a loss of at least HK$7.882 billion in stock cash.
Major shareholder subscribes to high-yield bonds
Huang Lichong, co-founder of Xiezong Management Group, told Qingliu Studio that the source of funds for dividends of Hong Kong-listed real estate companies may be overseas loans or financing.
Huang Lichong said that after real estate companies issue dollar bonds or raise new shares overseas, they may intercept this part of the funds in Hong Kong and directly distribute dividends, which can save the tax fees on the outbound flow of funds. In addition, real estate companies can also use domestic guarantees and foreign loans, such as depositing money in a domestic bank account and then asking the bank to provide a loan to the group's overseas company, so that they can also use this loan to distribute dividends.
"We will not distribute domestic money. Most of the time, this method is used." Huang Lichong said that for many years, domestic real estate companies have been in a state of crazy development and high-turnover land acquisition. It is difficult to have redundant funds in the country, and there is no need to distribute dividends in such a high-cost way. Therefore, dividends are basically distributed using overseas financing or overseas loans.
Qingliu Studio sorted out the information and found that some leading real estate companies, while distributing huge dividends, turned around and provided high-interest loans to major shareholders.
For example, Xu Jiayin and his wife received a total of more than 50 billion yuan in dividends from Evergrande, and then they spent a lot of money to lend the money back to Evergrande. Of course, interest is charged for borrowing money.
On November 6, 2018, Xu Jiayin subscribed to two Evergrande dollar bonds totaling 1 billion US dollars, namely the 2022 notes and 2023 notes issued in 2018. According to the company's disclosure, the two dollar bonds have a term of four years and five years, with annual interest rates as high as 13% and 13.75%. The total amount of these two bonds is 1.235 billion US dollars, of which 1 billion was subscribed by Xu Jiayin, which can almost be said to be the exclusive bond of the major shareholder.
These two bonds may be Evergrande's highest-interest bonds. The annual interest rates of bonds issued by Evergrande from 2017 to 2019 are generally between 7% and 11%. Among them, another 42-month US dollar bond issued immediately after the 2018 US dollar bond has an annual interest rate of only 8.25%.
In 2018, Xu Jiayin and his wife held the two bonds for only two months, and earned interest income of RMB 141 million.
By 2019, Xu Jiayin had received RMB 229 million in interest income from China Evergrande. However, the total of US$1 billion in bonds is at least RMB 6.8 billion, and at an annual interest rate of 13%, the annual interest income should be close to RMB 900 million. One possibility is that Xu Jiayin resold these two high-interest bonds to others. The 2019 annual report shows that Xu Jiayin did not hold any Evergrande bonds at the end of the year.
In 2020 and 2021, Xu Jiayin subscribed to China Evergrande's US dollar bonds of 50 million yuan, 20 million yuan and 580 million US dollars, with annual interest rates of 12%, 11.5% and 12%. Even after the thunderstorm from 2020 to 2022, he still took tens of millions of interest from Evergrande every year.
In addition to bonds, Xu Jiayin and his wife also provided other loans to Evergrande, but also charged interest.
According to the 2022 annual report, the balance of loans lent by Xu Jiayin and his wife to Evergrande is 3.856 billion yuan. According to statistics from Qingliu Studio, the total amount of loans provided by Xu Jiayin and his wife to Evergrande in the annual reports of the past five years may be close to 13 billion yuan.
The 2022 annual report shows that Evergrande owes Xu Jiayin and his wife interest of up to 2.2 billion yuan. If the interest already paid in the past five years is added to this payable, the interest Xu Jiayin owes for lending money to Evergrande is close to 2.7 billion yuan.
An interesting phenomenon is that Xu Jiayin's capable people also followed their boss to buy China Evergrande's US dollar bonds, but they bought US dollar bonds with slightly lower annual interest rates. For example, Xia Haijun and Lai Lixin both bought a lot of Evergrande's US dollar bonds, most of which had interest rates of 8% and 9%, with only one or two small purchases reaching 11.5%. According to the annual report data, Xia Haijun has taken 175 million yuan in interest from Evergrande in recent years through loans.
In addition, Liu Luanxiong also followed suit to buy Evergrande's high-interest bonds. According to media reports, Liu Luanxiong's family bought 1.1 billion yuan of Evergrande's US dollar bonds in 2019, with interest rates ranging from 6.25% to 8.25%. At the end of 2018, Liu Luanxiong's family subscribed to 4.7 billion Hong Kong dollars of Evergrande bonds, with an estimated annual return of about 500 million Hong Kong dollars. In early 2010, Liu Luanxiong also subscribed to Evergrande's corporate bonds twice, with a total amount of up to 750 million US dollars.
R&F Group and Country Garden also paid large dividends and borrowed from shareholders. Li Silian and Zhang Li of R&F Group also subscribed to their own US dollar bonds with an annual interest rate of 6.5%. Yang Guoqiang subscribed to Country Garden's US$580 million senior notes with an annual interest rate of 4.75%.
Of course, when the company faced a crisis, some major shareholders of real estate companies also took out real money.
As a major shareholder, the Yang family provided Country Garden with an interest-free, unsecured loan totaling HK$5.055 billion in 2022. In November 2021, Sunac also issued an announcement stating that Sun Hongbin paid out of his own pocket to lend Sunac Group an interest-free loan of US$450 million to help Sunac Group overcome its liquidity crisis.
Senior executives who follow their boss to make money
In this round of real estate cycle, in addition to major shareholders who make profits from dividends and high-interest bonds, a group of senior executives also made a fortune following their boss.
According to statistics from Qingliu Studio, Xia Haijun of Evergrande Group has received a total salary of 1.877 billion yuan since its listing, ranking first on the list of wealthy real estate executives and far ahead.
The Yang family and professional manager Mo Bin of Country Garden have received a total of 667 million yuan and 544 million yuan in salaries from the company. Shao Mingxiao and Zhao Yi of Longfor Group have received a total of 539 million yuan and 300 million yuan in salaries over the years. The Xu father and son of Shimao Group have disclosed salaries of up to 193 million yuan.
Other individuals whose salaries have exceeded 100 million yuan since the IPO include Vanke's former chairmanWang ShiAs well as professional manager Yu Liang, Sunac China's executives Sun Hongbin, Chi Xun, Wang Mengde, Shang Yu and Jing Hong, Longfor Group's Wu Yajun and Sunac China's Wang father and son.
There are also differences among "rich workers". Some people work hard for 20 years and their cumulative salary is just over 100 million yuan, while others earn nearly 300 million yuan a year.
Among them, Xia Haijun of Evergrande Group has an annual salary of mostly in the unit of "billion yuan", ranking first on the list of wealthy real estate executives.
From 2015 to 2021, Xia Haijun's annual salary remained between 154 million yuan and 298 million yuan, with a total salary income of more than 1.8 billion yuan. At the same time, Xia also holds Evergrande's shares, and the cumulative dividends he received may reach 370 million yuan. The amount of cash from the reduction of holdings is also 885 million yuan, and the interest income from the purchase of Evergrande bonds is about 175 million yuan. Adding up the above items, Xia Haijun's total compensation from Evergrande may exceed 3.3 billion yuan, making him a veritable "working emperor."
Shao Mingxiao of Longfor Group also has a high salary. His annual salary totaled 539 million yuan, and he earned 222 million yuan from stock dividends. In addition, Shao Mingxiao cashed out 679 million yuan by selling off a large number of Longfor shares. With the accumulation of multiple incomes, Shao Mingxiao's salary from Longfor Group may reach 1.439 billion yuan.
Zhao Yi of Longfor Group has received a total salary of 230 million yuan over the years, received stock dividends of about 40 million yuan, and cashed out 151 million yuan from selling stocks, for a total income of 422 million yuan.
Mo Bin of Country Garden Real Estate and Li Changjiang of Country Garden Services also achieved financial freedom in this round of real estate cycle.
Mo Bin's annual salary in 2020 and 2021 was as high as 133 million yuan and 192 million yuan respectively, and his total salary from Country Garden was 544 million yuan. At the same time, he also held Country Garden's stocks and bonds, with a total return of 110 million yuan. However, Mo Bin spent more than 200 million Hong Kong dollars to increase his holdings of Country Garden's stocks.
Li Changjiang was criticized by the public for his large-scale reduction of holdings and cashing out before the collapse of Country Garden. Li Changjiang's total salary is 126 million yuan, of which the annual salary in 2020 reached more than 60 million yuan. Li Changjiang holds shares in Country Garden Services and has received a total dividend of 13 million yuan. In addition to the reduction of holdings and cashing out 457 million yuan, the total income may be close to 600 million yuan.
Another generous boss is Sun Hongbin of Sunac, whose four top executives all received high salaries, with Chi Xun, Wang Mengde, Shang Yu and Jing Hong all receiving cumulative salaries exceeding 150 million yuan. Some executives also hold shares, share dividends, and profit from selling their holdings.
In front of the big bosses of real estate companies who spend money like water, some traditional professional managers seem insignificant.
For example, the large real estate company Gemdale Group is managed by professional managers Ling Ke and Huang Juncan. Their annual salary remains at the million-level, and their cumulative remuneration is within 130 million yuan.
For example, Yu Liang and Wang Shi, two professional managers of Vanke, have worked at Vanke for more than 20 years, but their total salary is less than 200 million Hong Kong dollars. Due to their low shareholding ratio, the total dividends received by Yu Liang and Wang Shi are converted to 30 million and 60 million yuan respectively.
However, when fighting against Baoneng's bid to take over the company, several companies associated with Vanke's management invested heavily to buy into Vanke.A sharesThe company has accumulated 6.08% of the shares and has received 5.5 billion yuan in dividends over the years. However, there is no further information on how these dividends were distributed among Vanke's management or business partners.
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