A Hong Kong court on Monday ordered the liquidation of real estate firm China Evergrande Group, a move likely to have repercussions for China’s crumbling financial markets as policymakers scramble to contain the deepening crisis.
Evergrande, the world’s most indebted developer with total liabilities of more than US$300 billion, sent a struggling real estate sector into a tailspin when it defaulted on its debt in 2021.
The decision was made by Hong Kong judge Linda Chan, who declared “enough is enough” after Evergrande failed to offer effective communications or resolutions for more than 18 months.
The company’s shares were trading down as much as 20 percent before the hearing. Trading was halted at China Evergrande and its listed subsidiaries after the verdict.
The decision to liquidate the developer, which has $240 billion in assets, will likely shake China’s already fragile financial and real estate markets.
Beijing is struggling with an underperforming economy, its worst real estate market in nine years and a stock market near a five-year low, so any further blows to the markets could further undermine policymakers’ efforts to rejuvenate growth.
The liquidation process could be complicated, with potential political considerations, given the many authorities involved.
But it is expected to have little impact on the company’s operations, including house-building projects, in the short term, as it could take months or even years before the offshore liquidator appointed by creditors takes control of subsidiaries in mainland China – a different jurisdiction. than Hong Kong.
Evergrande had been working on a $23 billion U.S. debt restructuring plan with the ad hoc group of bondholders for nearly two years. Its initial plan was sabotaged in late September when it said its billionaire founder, Hui Ka Yan, was under investigation for alleged crimes.
The liquidation petition was first filed in June 2022 by Top Shine, an investor in the Evergrande Fangchebao unit, which said the developer failed to honor an agreement to repurchase shares it purchased in the subsidiary.
The proceedings have been adjourned several times and Chan previously said the December hearing would be the last before a decision is made on whether to liquidate Evergrande in the absence of a “concrete” restructuring plan. .
Before Monday, at least three Chinese developers had been ordered by a Hong Kong court to be liquidated since the current debt crisis began in mid-2021.