Hong Kong High Court orders liquidation for China’s Evergrande – Assets mainly in mainland China, will it be practically difficult to recover? – Bloomberg

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On the 29th, the Hong Kong High Court (High Court) ordered the liquidation of China Evergrande Group, a major Chinese real estate development company undergoing restructuring. However, liquidation is likely to be a difficult process.

Judge Linda Zhang said the order would place China Evergrande under interim receivership and address several issues, including control by founder and chairman Xu Jiayin. He then appointed Alvarez & Marsal as trustee.

Hong Kong-listed China Evergrande’s stock price fell 21% on the 29th. Trading was halted after its market capitalization dropped to just HK$2.15 billion (approximately 40 billion yen). Most dollar-denominated China Evergrande bonds were trading at about 1.5 cents on the dollar as of late Thursday, according to data compiled by Bloomberg. This suggests that investors have little expectation of repayments.

The liquidation order solidifies China Evergrande’s position as the biggest symbol of the real estate crisis that has hindered China’s economic growth and led to a series of defaults.

“The liquidation order is not a surprise to the market given that creditors have yet to agree on the terms of the restructuring,” said Celina Tseng, credit analyst at CreditSights Singapore. Since most of her assets are on the mainland, she says she is “doubtful that offshore creditors will receive any substantial recovery from the liquidation order.”

Lance Jian, a restructuring partner at law firm Ashurst, asked what could be done once a receiver was appointed, particularly regarding the 2021 relationship between China and Hong Kong.arrangementThe market will be watching closely to see if it will be approved by one of the three designated Chinese courts based on this. “If such approval is not obtained, the trustee will have very limited enforcement powers over assets in mainland China.”

Since the crisis began in 2021, Hong Kong courts have ordered the liquidation of at least three other Chinese real estate developers, but none are far behind China Evergrande in complexity, asset size and number of stakeholders. Not as good as that. Additionally, there is little sign that the liquidation of Kagen International and Yokojo Kayo International, which is affiliated with Yokojo Group, is making any significant progress.

Recognition of Hong Kong bankruptcy proceedings in China is limited, and Chinese courts may appoint a receiver under their own jurisdiction.

On the 29th, the Hong Kong High Court ordered the liquidation of China Evergrande Group, a major Chinese real estate developer undergoing restructuring.

Source: Bloomberg

China Evergrande CEO Xiao En said in a statement, “We have done our best, and we regret the liquidation order.” He said, “We will steadily move forward with the handover of the homes and continue the normal operations of the group,” and also explained that he would try to communicate with the trustees.

The liquidation petition was filed in June 2022 by Top Shine Global Limited of Intershore Consult (Samoa), which was a strategic investor in Evergrande’s online sales platform.

However, even if a receiver is appointed, it is likely to face a difficult process with Chinese real estate developers. Most of China Evergrande’s operations are run by local units, which could be difficult for an offshore receiver to take over.

Gary Ng, senior economist at Natixis, said: “The liquidation itself is unlikely to create any further pressure on the hard-hit real estate sector, and the macroeconomic impact is likely to be limited.” “Investors are worried about a snowball effect on other issues, so sentiment will deteriorate.”

Original title:Evergrande Heads to Liquidation in Milestone for Property Crisis、Hong Kong Court Names Alvarez & Marsal as Evergrande Liquidator(excerpt)