HK court orders China Evergrande to liquidate with debts of $300bn

HONG KONG: A Hong Kong court on Monday ordered the liquidation of property giant China Evergrande Group, a move likely to send ripples through China’s crumbling financial markets as policymakers scramble to contain a deepening crisis.

Justice Linda Chan decided to liquidate the world’s most indebted developer, with more than $300 billion of total liabilities, after noting Evergrande had been unable to offer a concrete restructuring plan despite months of delays and several court hearings.

“It is time for the court to say enough is enough,” said Chan, who will give her detailed reasoning later on Monday.

Evergrande did not immediately respond to a request for comment from Reuters.

The decision sets the stage for what is expected to be long drawn-out and complicated process with potential political considerations, given the many authorities involved. Offshore investors will be focused on how Chinese authorities treat foreign creditors when a company fails. “It is not an end but the beginning of the prolonged process of liquidation, which will make Evergrande’s daily operations even harder,” said Gary Ng, senior economist at Natixis.

“As most of Evergrande’s assets are in mainland China, there are uncertainties about how the creditors can seize the assets and the repayment rank of offshore bondholders, and situation can be even worse for shareholders.”

Evergrande’s shares were trading down as much as 20% before the hearing. Trading was halted in China Evergrande and its listed subsidiaries China Evergrande New Energy Vehicle Group and Evergrande Property Services after the verdict.

Evergrande, which has $240 billion of assets, sent a struggling property sector into a tailspin when it defaulted on its debt in 2021 and the liquidation ruling will likely further jolt already fragile Chinese capital and property markets.

Beijing is grappling with an underperforming economy, its worst property market in nine years and a stock market wallowing near five-year lows, so any fresh jolt to investor confidence could further undermine policymakers’ efforts to rejuvenate growth.