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China Evergrande CEO, Finance Chief Resign Amid Probe

(Bloomberg) — China Evergrande Group, the embattled property developer, said chief executive officer Xia Haijun has resigned.

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Siu Shawn, an executive director at the company, will take over, according to a statement Friday. Chief Financial Officer Pan Darong also resigned.

Evergrande had been investigating how 13.4 billion yuan ($1.99 billion) of its deposits were used as security for pledge guarantees and seized by banks. The pledge guarantees threatened to wipe out most of the cash holdings at its property-services unit. A filing Friday says that the board requested that Xia, Pan and another executive resign as a result of information about their involvement in arranging the pledges obtained from the preliminary investigation.

The company said its independent investigation committee will issue a report once the probe is finished.

Evergrande, whose founder Hui Ka Yan stepped down as chairman of the onshore real estate unit last year, is at the center of a debt crisis that’s spreading among China’s property developers following a regulatory crackdown on excessive borrowing in the industry. The world’s most indebted developer faces a lengthy restructuring after being labeled a defaulter in December.

The company’s cash crunch has become a focus for global investors, concerned that a collapse might roil the financial system and curb growth in the world’s second-largest economy, which depends on the housing market for about a quarter of gross domestic product.

Chinese authorities are considering a proposal to dismantle Evergrande by selling the bulk of its assets, Bloomberg reported earlier this year. Saddled with more than $300 billion in total liabilities, the company has told creditors it aims to issue a preliminary restructuring plan by the end of July.

Evergrande established a seven-member risk management committee in December to “actively engage” with creditors. That panel includes senior managers from state-owned enterprises in its home province of Guangdong, along with China Cinda Asset Management Co., the nation’s largest bad-debt manager.

(Updates with background on pledges in third paragraph, more details on Evergrande’s situation starting in fifth paragraph.)

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