Friday, October 15, 2021

With Gucci bags and Dyson appliances, Evergrande woos retail investors

SHANGHAI—Thanks of investors bought wealth management products through China Evergrande Group, lured by promises of returns of close to 12 percent, gifts like Dyson air purifiers and Gucci bags, and guarantees from China’s best-selling developer.

Now, many fear that the cash-strapped property developer recently stopped repaying some investors and raised global alarm bells over its huge debt.

Some are protesting in Evergrande offices, refusing to pay the company’s plan with subsidized apartments, offices, stores and parking units, which began to go into effect on Saturday.

“I bought from property managers after seeing ads in Elevator, because I trusted Evergrande to be a Fortune Global 500 company,” said an Evergrande property owner in the group’s home province of Guangdong nicknamed Do.

“It is unethical of Evergrande not to pay my hard-earned money,” said the investor, who had invested 650,000 yuan ($100,533) in Evergrande Wealth Management Products (WMP) last year at an interest rate of more than 7 percent.

More than 80,000 people—including employees, their families and friends, as well as owners of Evergrande properties—purchased WMPs, raising more than 100 billion yuan in the past five years, said a sales manager at Evergrande Wealth, a co-worker. As was launched in 2016. Two-peer (P2) online lending platform which was originally used to fund its property projects.

About 40 billion yuan of investments are outstanding, the person said, refusing to be named, as they were not authorized to speak to the media.

China Evergrande did not respond to a request for comment on Tuesday, a public holiday in China.

With more than $300 billion in debt, Evergrande’s liquidity crisis rattled global markets this week. The company has vowed to repay the WMP investors.

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China’s years-long effort to destroy its economy has prompted companies to resort to off-balance sheet investments in search of funding.

After Beijing further capped debt levels for property developers last year, the most indebted players such as Evergrande felt even more pressure to find new sources of capital to ease mounting liquidity tensions, CP, Turned to employees, suppliers and customers for cash through trust and money. Management Products.

The sales manager and another Evergrande employee said that Evergrande Wealth began selling WMPs to individuals in 2019 after a regulatory crackdown caused the collapse of the P2P lending sector.

To attract investors, the sales manager offered gifts such as Dyson air purifiers and Gucci handbags to everyone who bought WMP over 3 million yuan during Christmas promotions last year.

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A product sheet provided by a sales manager seen by Reuters shows that WMP is classified as a fixed-income product suitable for “conservative investors seeking stable returns.”

‘De-facto Evergrande Products’

Of the two products sold last November, a construction company in Qingdao with yields ranging from 7.8 percent to 9.5 percent depending on the size of the investment, another 20 million yuan with an annual yield of 7 percent to 10 million yuan. Wanted to collect. one more. The minimum investments were 100,000 yuan and 300,000 yuan, respectively.

The sales manager said Evergrande typically offers some investors an additional yield of up to 1.8 percent, which can boost returns for a 12-month investment to upwards of 11 percent.

Documents show that the proceeds were to be used for working capital of Qingdao Liwei International Construction Company. The firm could not be reached for comment during the public holiday.

The prospectus said the repayment would be either from the issuer’s proceeds or from the Evergrande Internet Information Service (Shenzhen) company, which runs Evergrande Wealth and promised to cover principal and interest if an issuer fails to repay.

The sales manager said that the Qingdao company was working on Evergrande projects and would use payments from Evergrande to repay investors.

“This is a real Evergrande product,” said the person.

Other highly leveraged Chinese conglomerates, including HNA Group, which declared bankruptcy earlier this year, and China Baoneng have used similar products.

In a petition to various government bodies, a group of WMP investors in Guangdong accused Evergrande of improperly using funds that should have gone to issuers to fund their projects, and of adequately disclosing the risks. should not have.

He also complained that he was misled by the stature of its president, Hui Ka-yan, noting that he was seated prominently during the celebration of the 70th anniversary of the founding of the People’s Republic of China in 2019.

“Investors trusted Evergrande and bought Evergrande’s WMPs because of our love and trust in the party and government,” he wrote.

($1 = 6.4655 Chinese Yuan Renminbi)

by Zhang Yan and Tony Munro

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This News Originally From – The Epoch Times

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