China's most indebted real estate company has been receiving support from its fellow property tycoons. The CEO has been increasing financial ties tun by three other Chinese magnates. The initiative was endowed with the nickname 'Big Two Club,' where the executives of the real estate companies play poker games while discussing financial plans.
According to Financial Post, billionaire Hui Ka Yan is the top executive of China's real estate company China Evergrande Group. The entity was marked as the most indebted real estate company and experienced the worst decline in earnings this year. Despite the losses, the report claimed that Hui and his company has been getting support from fellow property tycoons to keep afloat.
China Evergrande Group has been increasing its financial ties with real estate entities ran by three other Chinese magnates. According to company filings and media reports, the top executives of these entities formed the 'Big Two Club.' The nickname allegedly came from their fondness for a Chinese poker game.
The group is participated by Chinese Estates Holdings Ltd. top executive Joseph Lau, C C Land Holdings Ltd.'s Cheung Chung Kiu, and New World Development Co. billionaire owner Henry Cheng.
Last January, Evergrande sold six billion USD worth of bonds by the time China was preparing for a lockdown. Lau and his family then bought a billion USD share from the entity, reported Bloomberg. The purchases allegedly formed part of at least 16 billion USD worth of transactions collaboratively engaged by the members of the Big Two Club over the past decade. A tally of the purchases included stock investments to property contracts.
The report claimed that the deals between the real estate tycoons were evidence that proved how China's social networks of influence known as guanxi work among the nation's property giants. It was further discussed that the relationships could be a source of strength among the real estate players, especially during the pandemic and whenever economic crises occur.
According to an assistant professor of finance and real estate at the Chinese University of Hong Kong, Maggie Hu, Evergrande is currently rated four levels below investment grade by Moody's Investors Services. It now has 372 billion yuan of short-term debt that would mature this year.
Hu added that she expects the tycoons to lend financial support to Hui under their mutual interests. She further said that they might collectively tackle the current crisis without incurring substantial losses.
