Lawsuit brought by China Evergrande founder's ex-wife against son for unpaid loan may be attempt to protect assets: analysts

Family members of the founder of China Evergrande Group may be scrambling to move their money around to prevent it from being confiscated, a month after the property giant was ordered to wind up, according to analysts.

Ding Yumei, the ex-wife of Evergrande's founder, Hui Ka-yan, or Xu Jiayin as he is known in mandarin Chinese, is suing her second son Peter Xu Tenghe to recover over HK$1 billion (US$128 million) in loan payments, according to a writ filed this week at the Hong Kong High Court.

But the case may in fact be an attempt by Ding and Xu to transfer assets to avoid their confiscation, analysts said.

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The former partner of the detained billionaire is asking Xu for the money, which includes principal and interest, according to the court filings. The case is not yet scheduled for a hearing.

"Xu and his father's assets could be confiscated by courts in mainland China as the two are currently under investigation," said Shen Meng, a director at Beijing-based investment firm Chanson & Company.

"As such, the lawsuit by the mother might help Xu to transfer some of his assets and prevent them from being seized."

Saddled with US$328 billion of liabilities, making it the world's most indebted developer, Evergrande was ordered by the Hong Kong High Court to liquidate in January, in the biggest such case seen in the city.

"Since only limited information was disclosed, it is hard to determine at this point whether this is an asset transfer in disguise, or whether [Ding is actually trying to] reclaim her money," said Wang Yuchen, director at Beijing Jinsu Law Firm.

While there is a possibility that financial disputes actually exist within the family, a lawsuit could also be used as a method to avoid paying creditors, or to "make a secondary distribution or transfer of property," said Wang.

"It is worth noting that Evergrande and Hui's family are getting a lot of attention at the moment ... so it's difficult for them to hide their actions. As for whether Ding could get the money, it depends on a lot of things, such as whether the court supports it, and Xu's financial situation," he added.

The matter is unlikely to have an impact on the property market, according to Kenny Wen, KGI's head of strategy based in Hong Kong.

"[Evergrande] has already defaulted, so the liquidation will only impact its shareholders and bond holders," Wen said. "[As for the property sector,] investors fully understand that the sector may take years to recover, and the market has already reflected those factors."

Ding and her son's loan agreement was signed in June 2020, at a time when China Evergrande was raising capital to fund the expansion of its property services and vehicle subsidiaries.

Xu was taken into custody last year along with employees at Evergrande's wealth management arm, which he oversaw. Hui Ka-yan himself was taken away by the police last September for suspected economic crimes.

Evergrande declined to comment when contacted by the Post.

Additional reporting by Yulu Ao

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