New Delhi: A Hong Kong court Monday ordered Evergrande Group — the Chinese property developer with nearly $300 billion in debt — to be liquidated. The liquidation order pronounced by Justice Linda Chan starts an expectedly long and protracted process to wind up the company with nearly $240 billion in assets.
“I do not see any proper ground for the court to grant a further adjournment of the Petition, which has been ongoing for over 19 months. The Company has not demonstrated that there is any useful purpose for the court to adjourn the Petition — there is no restructuring proposal, let alone a viable proposal which has the support of the requisite majorities of the creditors,” ordered the Hong Kong court. ThePrint has accessed the order.
The court order added: “To the contrary, it seems to me that the interests of the creditors will be better protected if the Company is wound up by the court, so that independent liquidators can take control over the Company, secure and preserve its assets and review and formulate a restructuring proposal if they consider that such course is appropriate.”
The order comes just a little over two years after the Evergrande Group defaulted on its international bond repayments in December 2021, setting off a crisis in the Chinese real estate sector. Evergrande announced $81 billion in losses for the years 2021 and 2022. The indebted property developer announced further losses of $4.53 billion during the first six months of 2023.
Shawn Siu, executive director of Evergrande Group Monday has reportedly said that the order of liquidation announced by the Hong Kong court is “regrettable” and “contrary” to the company’s original intention.
Siu announced that the company would do everything to continue operating in mainland China, where over 90 percent of its assets are located — even as it is listed on the Hong Kong stock exchange.
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‘Enough is enough’
Justice Linda Chan reportedly announced that “enough is enough” during the sixth hearing of the winding up petition presented by Top Shine Global Limited — an offshore creditor on 24 June, 2022.
Top Shine Global reports that Evergrande owes it HK$862.5 million in debt, which was due on 18 April, 2022, according to documents made available by the Hong Kong court accessed by ThePrint.
Earlier in December 2023, Evergrande had asked the court for eight weeks to submit a revised proposal for restructuring of its debt after the lawyers for Top Shine Global changed its stance and would not seek an order for the immediate winding up of Evergrande.
However, no such proposal was made till 26 January 2024, when Evergrande filed for an adjournment of three further months “to push forward the Company’s newly revised restructuring plan,” the court observed.
“There is no explanation for the delay and the failure to provide the so-called “new restructuring plan”, other than a general assertion that the Company needs time to “balance a host of factors to formulate a plan that would garner creditor support,” the Court observed.
“It is clear that far from ironing out the details of the revised proposal put forward before the last hearing, the Company now seeks to put forward yet another “new restructuring plan” which is nothing but some general ideas about what it may or may not be able to put forward in the form of a restructuring proposal,” Justice Chan observed.
As reported by Financial Times (FT), the order would allow court-appointed liquidators to attempt to seize control of assets of Evergrande Group in mainland China, as Hong Kong has a mutual recognition agreement on insolvency and restructuring that applies in some parts of China.
But how far the liquidators would be allowed to seize assets depends on how mainland courts accept the order made by the Hong Kong court, FT reported.
(Edited by Poulomi Banerjee)
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