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Banks Seize US$2 Billion from Evergrande Group

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Banks Seize US$2 Billion from Evergrande Group

The China Evergrande Group has ousted its CEO and chief financial officer after banks seized over US$2 billion in capital from its property services arm.

The resignations come as the China Evergrande Group fights for survival and works to reach a restructuring agreement with its debtors. The group owes an estimated US$300 billion.

Evergrande Property Services executives stepped down on Friday following an internal investigation into the sudden seizure of 13.4 billion yuan (US$2 billion) in deposits.

According to a statement released late Friday night by the company, the money was seized because it was being used to guarantee a loan to a “third party”.

According to the report, funds obtained from the loan were then “diverted back to the Group through third parties and used for general operations”.

Read: Evergrande Group Warns it Could Run Out of Money

“As a result, the board resolved to request” the resignations of the two executives involved – CEO Xia Haijun and CFO Pan Darong – according to the statement posted on the Hong Kong Stock Exchange website.

According to Bloomberg, Evergrande’s newly appointed CEO is Siu Shawn, a former executive director.

Evergrande has scrambled to sell assets recently, with chairman Hui Ka Yan using his wealth to repay some of the company’s debts.

There have been knock-on effects in China’s property sector due to Evergrande’s troubles, with smaller firms defaulting on loans and others facing cash shortages.

A push by Beijing to reduce indebtedness has cut cash flows for China’s real estate firms, which long relied heavily on loans to finance their massive developments.