A court ordered the procedure after the firm failed to come up with a convincing restructuring plan
A Hong Kong court on Monday ordered the liquidation of property giant China Evergrande Group, the world’s most indebted developer, after an 18-month long hearing.
Judge Linda Chan delivered the ruling, saying “it is time for the court to say enough is enough” after the troubled developer repeatedly failed to come up with a convincing plan to restructure its debts. The company had been given seven extensions since court proceedings began in 2022.
The real estate firm, which first ran into trouble refinancing its debt in 2020, now faces 2.39 trillion yuan ($333 billion) of total liabilities, a figure that significantly outweigh its 1.74 trillion yuan ($240 billion) in assets. Most of the latter are in mainland China, which is a different jurisdiction than Hong Kong.
The liquidation petition was lodged by Top Shine in June 2022, an investor in Evergrande unit Fangchebao, which claimed the developer had failed to honor an agreement to repurchase shares it had bought in the subsidiary.
Evergrande sent China’s struggling property sector into a tailspin when it defaulted on its debt in 2021. The company’s troubles affected China’s entire real estate market, with companies accounting for 40% of home sales defaulting on their debt obligations since mid-2021, including Kaisa Group and Shimao Group Holdings. The liquidation ruling will likely further hit the country’s capital and property markets, experts say.
Following Monday’s decision, the judge appointed Alvarez & Marsal as the liquidator, which is expected to take control of Evergrande’s assets, negotiate with creditors on debt restructuring, and take over management of the company.
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