Hong Kong Court Orders Liquidation of Evergrande
In a significant blow to China's real estate sector, a Hong Kong court has ordered the liquidation of the world's most indebted property developer, China Evergrande Group. Justice Linda Chan made the decision, stating, "It is time for the court to say enough is enough," as Evergrande failed to present a concrete restructuring plan more than two years after defaulting on its offshore debt.
With over $300 billion in total liabilities, Evergrande's liquidation raises concerns about the treatment of foreign creditors and the impact on China's fragile property market. Evergrande's shares plummeted up to 20% before the hearing, prompting trading halts in its subsidiaries, China Evergrande New Energy Vehicle Group and Evergrande Property Services.
The ruling sets the stage for a complex process with potential political implications, as investors await Chinese courts' response to Hong Kong's decision. Alvarez & Marsal has been appointed as the liquidator with an aim to handle a new restructuring plan amid investigations into Evergrande's chairman, Hui Ka Yan, for suspected crimes.
The court's decision reflects a culmination of Evergrande's failure to engage with creditors, impacting its ability to restructure and adding to the woes of China's property sector, which accounts for roughly a quarter of the world's second-largest economy. Despite the ruling, Evergrande's CEO, Siu Shawn, assured that home building projects would proceed, and the liquidation would not affect the company's onshore and offshore units.
The court's decision comes at a time when China grapples with economic underperformance, a struggling property market, and a stock market near five-year lows, posing challenges to policymakers' efforts to stimulate growth.
