Embattled Chinese real estate giant Evergrande has ousted its CEO and CFO after an internal investigation into why banks seized over $2 billion from the firm’s property services arm, the company has said.
The resignations come as Evergrande fights for survival and works to reach a restructuring agreement with debtors, to whom it owes an estimated $300 billion.
The executives were forced to step down on Friday following an internal investigation into why banks unexpectedly seized 13.4 billion yuan ($2 billion) in deposits from its real estate services unit, Evergrande Property Services.
Investigators established the money was seized because it was being used as a guarantee to allow a “third party” to obtain a loan, according to a statement from the company released late Friday night.
Funds obtained from that loan were then “diverted back to the Group via third parties and were used for… general operations”, it added.
“In view of this, the Board resolved to request” that the executives involved resign, including CEO Xia Haijun and chief financial officer Pan Darong, according to the statement, which was published on the website of the Hong Kong Stock Exchange, where the firm is listed.
An executive director, Siu Shawn, has been named CEO.
Once a leading light in China’s real estate sector, Evergrande has in recent months scrambled to offload assets, with chairman Hui Ka Yan paying off some of its debts using his own personal wealth.
Evergrande’s woes have had knock-on effects throughout China’s property sector, with some smaller firms also defaulting on loans and others struggling to find enough cash.
Long heavily dependent on loans to finance their massive developments, China’s real estate firms have found themselves in trouble as a push by Beijing to reign in indebtedness has cut cash flows.