China Evergrande CEO, CFO resign amid probe into subsidiary

NEW YORK (AP) — Struggling Chinese real estate developer China Evergrande has announced that its chief executive and chief financial officer have resigned after initial findings in a probe found $2 billion belonging to its property unit subsidiary was redirected back to the group.

The news, announced Friday, comes as the company is already saddled with $310 billion in debt.

China Evergrande said CEO Xia Haijun and CFO Pan Darong had resigned over their involvement in an arrangement to use the money as collateral to guarantee a series of loans. The money was then redirected to Evergrande through a third party, the company said. The loans involved three sets of deposits. The company didn’t name the third party.

The company is discussing with the subsidiary Evergrande Property Services regarding the repayment plan of the sums related to the pledges. The plan is mainly to set off the relevant sums by transferring assets of the group to Evergrande Property Services.

In light of the above preliminary findings, China Evergrande said it will consider appointing an internal control consultant to conduct a comprehensive review of the internal control and risk management systems of the company.

Evergrande, the world's most indebted developer, came under pressure after China’s ruling Communist Party ordered property developers to cut their debt levels. The authorities are trying to direct the industry toward a more sustainable pace of development after many years of stimulus-fueled growth.