Hong Kong Court Rules Liquidation of China’s Evergrande Group

In a big blow to the China’s real estate sector, a Hong Kong court on Monday ordered the troubled China Evergrande Group to wind up its operations following a petition by the creditors to liquidate the firm.

The company can appeal against the order and the provisional liquidator of the company will be named later.

The China Evergrande Group is a Chinese property developer, and the second largest in China by sales. It was founded in 1996 and incorporated in the Cayman Islands and headquartered in the Houhai Financial Centre in Shenzhen, Guangdong Province, China.

Justice Linda Chan, one of the Judges of the Court of First Instance of the High Court who gave the ruling, said that the hearing has lasted for one and a half years, and the company still has not been able to bring forward a concrete restructuring proposal to restructure its $328 billion in liabilities.

“I think it is the time for the court to say enough is enough,” the Judge said and added that the court at the previous hearing in December had made it very clear it expected to see a fully formulated and viable proposal.

Justice Chan also rejected the developer’s plea for another adjustment and said: “The debt restructuring plan promised by Evergrande’s team failed to materialise. So why should the company still ask for further adjournment?”

The lawsuit was filed in June 2022 by Top Shine Global, which represented Lin Ho-man, who failed to recover $110.4 million that was invested in Evergrande in March 2021.

The ruling adversely impacted the company’s shares which fell 21% in Hong Kong. Even Evergrande New Energy Vehicle Group slumped 18%, and those of Evergrande Property Services Group Limited fell 2.5%, before trading was halted in all three stocks.

The provisional liquidators will now take over Evergrande’s management and handle its affairs. This includes negotiating debt restructuring with creditors and taking control of its assets, books and records, in accordance with the liquidation procedures in Hong Kong.

However, undeterred by the court verdict, Evergrande Group’s executive vice-president Xiao En said that the company will ensure its normal operation in accordance with law and in accordance with the protection of the rights of our onshore and offshore creditors.

“We will keep communicating and work with the liquidators to work out the group’s debt in accordance with the relevant procedures and international practice,” Xiao En said in a statement after the ruling.

Challenges Many

According to agency reports, the court order faces cross-jurisdictional challenges as most of the company’s assets are located in mainland China. Evergrande has more than 1,200 projects at different stages of progress, ranging from near completion to under construction.

“he company will steadily push forward to ensure homes under construction are delivered to buyers,” Xiao said.

Once China’s top-selling property developer, Evergrande slipped into public financial woes in 2021, defaulting on its offshore financial obligations after Chinese regulators tightened the noose on excessive borrowing in the real estate sector.

It may be recalled that Evergrande said that it was attempting to refine a new plan that would restructure liabilities amounting to more than $300 billion. In December, it was granted a brief reprieve, but that proved short lived.