Hong Kong

BILLIONAIRE owners of Chinese developers have dipped into their own pockets for at least US$3.8 billion to save their troubled companies from default, as a cash crunch engulfs the industry.

From sales of luxury assets to stakes in sought-after listed companies, the personal balance sheets of China's property tycoons have become key for investors to determine whether developers will meet their debt obligations.

Founding chairmen of at least 7 real estate companies have tapped their wealth in recent weeks to support the firms. The efforts underscore how the liquidity crisis is more desperate than previous squeezes, when real estate firms were able to reap cash from sales blitzes or by offloading trophy assets.

Now, with China's home sales and prices falling, banks growing reluctant to lend, and yields in the offshore bond market soaring, many developers are counting on their founders as a last resort.

The magnates' moves stand in contrast with counterparts overseas, where the concept of limited liability generally shields owners' personal wealth from creditors' claims.

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The boundary is not so clear in China. "In China, regulators can pressure the large or controlling shareholders to mix their personal assets with the company's and treat the two as inseparable," said Zhiwu Chen, director of the Asia Global Institute at the University of Hong Kong.

"It's also partly because the controlling shareholders, especially founders, often do treat the company's assets as if they were their personal property."

At least for now, such moves have boosted sentiment among bondholders.

China Evergrande Group's 8.25 per cent US dollar bond due next year has rebounded to around 30 cents on the dollar from a record low of 22.7 cents a month earlier, after its chairman Hui Ka Yan raised funds by disposing of personal assets and pledging shares.

While it is unclear how the money was used, the property giant has averted default 3 times by paying overdue bond interest. Notes of Sunac China Holdings, Guangzhou R&F Properties, Shimao Group Holdings and CIFI Holdings Group all rose after news of their founders' support.

Evergrande's Hui was urged by Chinese authorities to use his personal wealth to alleviate Evergrande's debt crisis. He has injected more than US$1 billion into Evergrande since July, reported China Business News - about an eighth of his estimated US$7.7 billion wealth, showed the Bloomberg Billionaires Index. But it remains unclear whether his fortune is big and liquid enough to make a sizeable dent in the developer's total liabilities, which swelled to more than US$300 billion as of June.

Beijing-based developer Sunac is known for acquiring assets of troubled rivals, such as Oceanwide Holdings' city-centre projects in Shanghai and Beijing in 2019. Chairman Sun Hongbin's net worth is estimated at US$4 billion, showed the Bloomberg Billionaires Index.

Shimao's Hui Wing Mau started his property career by developing one of China's earliest 3-star hotels, residences and resorts. Now, Shimao has a line of luxury hotels in some of the best spots in China's biggest cities. The 3 floors he pledged for loans, in the world's most expensive office building The Center in Hong Kong, are a trophy in his estimated US$5.6 billion fortune.

CIFI's Lin Zhong co-founded a property brokerage with a younger brother in 1992 and turned it into a developer 2 years later. When private home ownership was introduced in 1998, Lin moved the firm's headquarters to Shanghai to embark on a nationwide expansion. Lin's other younger brother Lin Feng, who was in high school when Lin Zhong founded CIFI, joined the firm right after completing a master's degree.

Started by Zhang Li and Li Sze Lim, R&F made a push into the hotel business in 2017 when it splurged US$2.9 billion to buy Dalian Wanda Group's 77 hotels. R&F is now the world's biggest deluxe hotel owner, with 91 in operation and another 45 under development. BLOOMBERG