Troubled Chinese development companies, EvergrandeAfter 18 months of lengthy hearings, a Hong Kong court ordered liquidation.
Evergrande Group, which holds the ignominious title of being the world’s most indebted real estate developer, with debts of around $300 billion, has been granted seven extensions since it first filed court proceedings in June 2022, but has failed to convince the court that it has Feasible restructuring plan. But it can still be appealed.
Judge Linda Chan handed down the ruling on Monday morning, saying “it is time for the court to say enough is enough”.
Top Shine, an investor in Evergrande’s RVB, submitted a liquidation application in June 2022, saying the developer failed to fulfill an agreement to repurchase the shares it purchased in the subsidiary.
Evergrande had been working on a $23 billion debt restructuring plan, but the plan fell apart in September when the company announced that its founder, billionaire Xu Jiayin, had been fired. Under investigation for “suspected illegal crimes”.
Provisional liquidators will be announced on Monday afternoon and are expected to take over Evergrande’s assets, negotiate with creditors on a debt restructuring and take over the company’s management.
However, the procedure is expected to be complex and have little impact on the company’s short-term operations. Chinamay take months or years, and may encounter difficulties along the way.
China is a different jurisdiction HongkongAnne Stevenson-Yang, an analyst and founder of research at J Capital, said that in previous cases such as developer Kaisa Group and solar company Suntech Power, the process has been “vague”.
“I think the key thing is there’s not really an orderly legal process.”
Redmond Wong, chief China strategist at Saxo Markets, said the likelihood of Evergrande’s Hong Kong shareholders receiving any benefit from the liquidation proceedings was “very low”.
“For overseas creditors, the key concern is whether the liquidator can successfully apply for assistance from the mainland courts in Shanghai, Shenzhen and Xiamen and obtain mainland assets under the cooperation mechanism re-established in 2021.”
After the verdict, China Evergrande, China Evergrande New Energy Vehicle Group and Evergrande Property Services were suspended from trading, and their stock prices had fallen as much as 20% before the trial on Monday.
It was unclear on Monday how the ruling would impact the industry and China’s struggling economy. Stevenson-Young said much of the impact of Evergrande’s woes had already been felt after the default in 2021. Since China’s central government tightened regulations in 2020, about 40% of home sales in China have gone into default. The government has been intervening heavily as China grapples with a poor economic performance, its worst real estate market in nine years and a stock market that has plunged to nearly five-year lows.
“The Chinese government is so desperate to support the stock market and now I hear they are Merge all these asset managers Enter [sovereign wealth fund, China Investment Corp]just really hope they can keep kicking the ball,” she said.