New thunderclap in the world of real estate in crisis in China.
A Hong Kong court has just ordered, this Monday, the liquidation of the Chinese real estate giant Evergrande which failed to present a convincing restructuring plan.
Defaulting on payments for the first time in 2021 and declared bankrupt in the United States, the group was a pillar of the Chinese economy when the Chinese construction and real estate sector still represented around a quarter of Chinese GDP.
Except that Chinese President Xi Jinping had estimated that the debt accumulated by Evergrande and other real estate companies constituted a risk for the Chinese financial system and overall economic health.
As a result, the authorities have gradually restricted developers' access to credit since 2020, triggering a wave of payment defaults.
So much so that Evergrande's debt now reaches nearly $328 billion.
Faced with this situation, a liquidation request was filed before a Hong Kong court in June 2022 by Top Shine, a strategic investor in the home builder's online sales platform.
If the procedure dragged on, the Hong Kong court considered that Evergrande was unable to present a convincing restructuring plan.
“The obvious lack of progress on the part of the company in presenting a viable restructuring plan.
I consider it appropriate for the court to render a judgment for the liquidation of the company, and that is what I order,” declared Judge Linda Chan who is expected to present the details of the case in the afternoon. its judgment and could appoint a liquidator for Evergrande.
It remains to be seen whether this decision taken in the semi-autonomous Chinese region of Hong Kong can materialize in mainland China where the group is based.
“Today’s court decision is contrary to our original intention.
This is extremely regrettable,” Evergrande Chief Executive Shawn Siu told Chinese business media outlet 21st Century Business Herald.
The title unscrews
Immediately after this announcement, the Chinese real estate giant's shares fell by more than 20% and the Hong Kong Stock Exchange suspended trading of the stock.
“Trading in the securities of Evergrande Property Services Group Limited has been suspended” indicated the financial center which also suspended the listing of the electric vehicle subsidiary Evergrande NEV while according to information from the local press, its boss is in under house arrest after being arrested at the beginning of the month.
What about Evergande's activities now when real estate prices in the majority of large Chinese cities are falling?
Obviously, if the liquidation procedure is initiated, it could take months or even years as the group's activities are sprawling in China but also around the world.
The group has nearly $240 billion in assets.
In the meantime, Evergrande has ensured that construction projects are still delivered despite the liquidation order, assured its general director, indicating that the Evergrande subsidiary in Hong Kong was independent of the group's activities in China.