Chinese authorities have urged (we don’t know what “urge” means) Evergrande’s founder, Hui Ka Yan, to use his personal funds to help pay Evergrande’s debt obligations. Other Chinese companies have been advised to prepare to meet payments due on their offshore bonds as well. Here are two reports that discuss details:
“China Urges Evergrande’s Hui to Pay Debt with His Own Wealth,”
“China urges Evergrande founder to pay debt with personal wealth,”
These are new rules for entrepreneurs in China. Essentially, the Beijing government now says it can and will impose a personal guarantee on a founder/owner if something goes wrong and the company misses a payment.
Will that shift impact capital markets? Alter risk-taking? Discourage investment?
It seems there’s no Chapter 7 or 11 in China. Instead, it appears you now roll a “7” or “11” with a jailer or worse.
Caveat emptor.
David R. Kotok
Chairman of the Board & Chief Investment Officer
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