On 29th January (local time), the Hong Kong court issued an order to liquidate Evergrande, a property developer from China. Notably, Evergrande was once China’s most prominent property developer and had played a significant role in the country’s economy. However, the company faced financial challenges, leading to the accumulation of debt of over USD 300 billion. The court order came after a financer filed a winding-up petition in 2022 and sought liquidation of the company after Evergrande defaulted on an overseas loan in 2021.
The petition against Evergrande was filed by Top Shine Global Limited of Intershore Consult (Samoa) Ltd, a strategic investor in Energrande’s online sales platform.
In the order, High Court Judge Linda Chan pointed out that Evergrande was not progressing to present a workable restructuring plan. She also highlighted the company’s insolvency. The judge stated, ” I consider it appropriate for the court to make a winding-up order against the company, and I so order.” Earlier, the court stressed a comprehensive and viable proposal during the hearing in December. However, Evergrande failed to present a workable plan.
After the decision, Evergrande’s shares saw a steep fall of 20.87 per cent and reached HKD 0.16 in Hong Kong. The trade was stopped on the stock exchange at 10:19 AM (local time). Furthermore, the situation in Evergrande’s property development branch affected its electric vehicle subsidiary, leading to a trading halt in that sector.
Speaking to media, lawyer Fergus Saurin, representing a group of creditors, accused Evergrande of not engaging with them. He highlighted a history of unproductive last-minute engagements and blamed the company for the situation. Detailed judgment in the matter is yet to come. Following the judgment, a liquidator will be appointed to complete the process.
Evergrande first defaulted on a loan in 2021. Subsequently, the company declared bankruptcy in the United States. As the company had a notable impact on the Chinese economy, its downfall has been closely monitored by sector experts. Notably, Chinese President Xi Jinping had expressed concerns over debt accumulated by property developers and the overall health of the country’s economy. In 2020, authorities tightened developers’ credit access, leading to a series of defaults. By June this year, it is expected that Evergrande’s debts will rise to USD 328 billion, contributing to the ongoing property crisis in China.
