© Reuters. FILE PHOTO: The Evergrande Center of China Evergrande Group is seen in Shanghai, China September 24, 2021. REUTERS/Aly Song/File Photo
By Clare Jim
HONG KONG (Reuters) – China Evergrande (HK:) Group goes back to a Hong Kong court on Monday in a high-profile case to decide whether to liquidate the Chinese property developer that has been at the centre of a spiralling debt crisis in the world’s second-biggest economy.
Evergrande, the world’s most indebted developer with more than $300 billion of total liabilities, sent a struggling property sector into a tailspin when it defaulted on its debt in 2021. The low point for the firm deepened a debt crisis in the sector and sparked many other company defaults in a damaging economic blow that to this day remains a drag on growth.
A liquidation ruling of the developer which has $240 billion of assets would likely jolt already fragile Chinese capital and property markets. Low investor and consumer confidence remains a major drag on China’s economy, and any fresh hit to 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 home construction projects in the near term, as it could take months or years for the offshore liquidator appointed by the creditors to take control of subsidiaries across mainland China – a different jurisdiction from Hong Kong.
Evergrande had been working on a $23 billion debt revamp plan with the ad hoc bondholder group for almost two years. Its original plan was scuppered in late September when it said its billionaire founder Hui Ka Yan was under investigation for suspected crimes.
The ad hoc group, which was “firmly opposed” to the revised terms proposed by Evergrande in December, plans to join a petition to liquidate Evergrande at the hearing on Monday, which could increase the chances of an immediate liquidation order from the court, Reuters reported last week.
The winding-up petition was first filed in June 2022 by Top Shine, an investor in Evergrande unit Fangchebao which said the developer had failed to honour an agreement to repurchase shares it had bought in the subsidiary.
The winding-up proceedings have been adjourned multiple times and Hong Kong High Court Justice Linda Chan has said previously the December hearing would be the last before a decision was made whether to liquidate Evergrande in the absence of a “concrete” restructuring plan.
This story originally appeared on Investing
