Evergrande, the world’s most indebted property developer, has been provided a final opportunity by a Hong Kong High Court to propose a feasible debt solution. If no viable proposal is presented, the company might be pushed towards liquidation.

by Michael Scurry

Facing a momentous financial crisis, Chinese property behemoth Evergrande has been handed a potentially final ultimatum by Hong Kong’s High Court to offer a substantive repayment strategy for its towering debts, failing which the company could be steered into liquidation.

Justice Linda Chan, overseeing the case, postponed a previously slated winding-up hearing to December 4th, emphasizing that it will serve as the terminal opportunity for Evergrande to deliver a resolution before the court reaches its decision.

Amassing liabilities exceeding $325bn (£268.4bn), Evergrande stands as the globe’s most burdened property developer. After defaulting on its financial obligations two years prior, the enterprise has consistently sought to formulate a new reimbursement framework. Emphasizing the gravity of the situation, Justice Chan voiced that absent a tangible plan, liquidation of the firm would likely ensue, though a liquidator would still be able to broker deals with creditors.

While Evergrande has yet to provide a public response to these recent developments, the legal action was initiated by Top Shine Global in June 2022, an investor in the Evergrande division, Fangchebao. Top Shine’s grievance stemmed from Evergrande’s failure to adhere to a share buyback commitment.

The beleaguered firm’s attempts to renegotiate terms with its creditors encountered significant impediments last month. This follows the announcement of an investigation into Evergrande’s founder, Hui Ka Yan, and a principal subsidiary over alleged unlawful actions. Furthermore, the firm was restricted by Chinese regulatory bodies from procuring new dollar bonds, a pivotal element in their debt restructuring blueprint.

Domestically, a significant proportion of Evergrande’s outstanding amounts is attributable to Chinese residents, many of whom are awaiting the completion of their homes. The 2021 default by the company reverberated across international financial landscapes, given that property ventures constitute nearly a quarter of China’s GDP.

Although creditors situated outside of mainland China possess the right to instigate lawsuits against Evergrande, such as Top Shine’s approach, liquidation might not pave a straightforward path. Analysing the predicament, Eveline Danubrata of REDD Intelligence remarked on the intricate dynamics of addressing offshore creditors while also appeasing various domestic stakeholders.

In addition to settling creditor hierarchies during a potential liquidation, the pressing challenge remains – the completion of properties for over a million awaiting Chinese residents. As Danubrata observes, it seems implausible that international lenders would be prioritized over Chinese homebuyers. The intricate situation might ultimately necessitate extensive collaboration with the Chinese administration.

(Associated Medias | FAD) – All rights reserved.