Evergrande Legal Twist: The court hearing regarding a liquidation petition against China Evergrande Group (3333.HK) has been adjourned in a Hong Kong court to the following month, providing more time to finalize a debt restructuring proposal. This comes as a significant relief for the beleaguered developer.
In an unexpected move on Monday, the court postponed the hearing to Jan. 29 after Evergrande’s (3333.HK) legal team requested an adjournment, stating that no creditors were actively seeking liquidation. Hong Kong High Court Justice Linda Chan, when adjourning the hearing to Monday on Oct. 29, had previously indicated that the next hearing would be the final one before a decision on liquidating Evergrande.
Following Monday’s adjournment order, Evergrande shares rebounded, surging more than 13%. As the world’s most indebted property developer, with over $300 billion in total liabilities, Evergrande defaulted on its offshore debt in late 2021, symbolizing a broader debt crisis in China’s property sector. Last week, Evergrande hastily put together a revised restructuring plan to avert a potential liquidation order.
Surprisingly, a representative of investment bank Moelis & Co, advising a group of offshore Evergrande creditors, expressed astonishment at the decision. The creditors, opposing the latest restructuring plan, stated they would seek liquidation if the terms remained unchanged.
Also Read: China Evergrande Group Last-Ditch Effort to Avoid Liquidation Faces Skepticism
During the court session, the Evergrande lawyer mentioned that the developer anticipated “refining” its restructuring proposal in the next five weeks. The judge urged Evergrande to engage in direct discussions with the “relevant authorities” regarding the revamped terms.
The liquidation of Evergrande, listing $240 billion in assets as of June-end, would intensify pressure on an already struggling property sector, constituting a quarter of the world’s second-largest economy. Evergrande’s debt challenges have raised global investor concerns amid a sluggish post-pandemic economic recovery, with property sales dwindling and numerous unfinished homes across the country.
In response to the property sector’s instability, authorities have implemented a series of measures to revive it, especially following the debt troubles of giants like Evergrande and Country Garden (2007.HK) in recent years. Evergrande has been working on a debt restructuring plan for almost two years. The original plan faced setbacks in late September when its billionaire founder, Hui Ka Yan, was confirmed to be under investigation for suspected criminal activity.
The developer’s failure to secure Chinese regulatory approval to issue new U.S. dollar bonds, a crucial part of the restructuring plan, has resulted in the absence of a creditor vote on the plan. Top Shine, an investor in Evergrande unit Fangchebao, initiated the liquidation petition in June 2022, citing Evergrande’s failure to honor an agreement to repurchase shares the investor bought in the unit.
Our Reader’s Queries
How Evergrande found itself on the wrong side of China’s regulators?
In 2021, the property industry in China faced a major setback. The Chinese government became worried about the high debt levels in the industry, leading to a regulatory crackdown. As a result, Evergrande was unable to make interest repayments on over US$300bn in debt. This caused a liquidity crisis in China’s housing development sector.
Does Evergrande own property in USA?
Evergrande, a company with assets in the United States, reported liabilities of $335 billion by the end of last year. The fact that it is still in negotiations with its creditors is indicative of the significant structural issues and gradual decline that China’s real estate market is currently experiencing.
What is the problem with Evergrande China?
Evergrande, a Chinese property developer, is currently in debt of over $325bn (£269bn), surpassing Russia’s national debt. The company has been struggling for the past two years, facing multiple crises and failing to make payments on its multi-billion dollar loans.
Is Evergrande property Services suspended?
The Hong Kong stock exchange has suspended share trading for Evergrande, a troubled Chinese property company. This comes just a month after the company resumed trading following a 17-month suspension.