Evergrande, which was one of the largest Chinese real estate companies, seems to be reaching the end of the escape.
Suffocated by a debt of 328,000 million dollars (about 302,000 million euros), the Hong Kong justice system this Monday ordered the liquidation of the company, as its creditors demanded, after more than a year and a half of unsuccessful attempts to restructuring of its extraterritorial (
offshore
) debt.
“It is time for this court to say enough is enough,” Judge Linda Chan argued in her decision, which is still appealable, according to the Hong Kong newspaper
South China Morning Post
.
The company, based in the city of Guangzhou (or Canton), had managed to persuade authorities in the past to give it more time to renegotiate, and had been granted up to seven extensions, the last in December.
The blow of the liquidation has been immediately felt on the Hong Kong stock market, with the shares of the real estate company and its subsidiaries plummeting, until their trading was suspended.
The fall of Evergrande, considered the most indebted developer in the world, and in whose rescue by Beijing some analysts have believed until the end, is one more sign of the critical moment that the sector is going through in China.
Edward Middleton and Tiffany Wong of the consulting firm Alvarez & Marsal, this Monday in Hong Kong.
HOLMES CHAN (AFP)
The judge has appointed Edward Middleton and Tiffany Wong Wing-sze, of the consulting firm Alvarez & Marsal, as judicial administrators.
Both will be in charge of selling all possible assets to satisfy creditors' demands, although their room for maneuver could be limited in mainland China, where a significant part of the company's assets and investments are located.
Evergrande has 1,241 real estate projects for sale in different phases of development, according to the 2022 report, published last summer.
The need to make cash will also collide with a sector in more than low hours in the Asian giant, where the starts of new constructions have plummeted by 59% since the beginning of 2021;
Real estate investment has fallen by 9.6% in 2023 and, in December, 89% of Chinese cities recorded price drops in the sector, according to data exploited by analysts at the financial company Convera.
Evergrande “has done everything possible to defend itself against this request for liquidation abroad,” Siu Shawn, executive director of the firm, assured the Chinese media
21st Century Business Herald
.
He has also acknowledged that the group's operations "are facing enormous difficulties and its resources are extremely limited."
But he has assured that “he will continue to strive to do everything possible to ensure the stability of business and operations” in mainland China, and promote “the delivery of buildings.”
Abandoned Evergrande shopping complex, this Monday in Beijing.
GREG BAKER (AFP)
The decision of the Hong Kong court arises from a lawsuit initiated in June 2022 by the firm Top Shine Global, to recover a million-dollar debt derived from failed investments in 2021. By then, what had been until recently the largest developer in China had began to show the seams of the brick bubble.
The real estate group founded in 1996 by Xu Jianyin – today under house arrest – had grown in the heat of Chinese developmentalism and the golden years of construction.
But it entered a serious liquidity crisis in 2021 and incurred its first debt default in dollars at the end of that year.
Last August, Evergrande reported losses of 33,012 million yuan (4,198 million euros) in the first half of 2023. Only a week before it had announced that it was filing for bankruptcy law in the United States.
At the beginning of September, its main subsidiary, Hengda Real Estate, reported that it was facing at least 1,931 disputes for an amount of 437,743 million yuan (56,430 million euros).
Shortly after, the Chinese police arrested, for the first time, several employees of Evergrande Financial Wealth, the financial arm of the promoter, and requested the collaboration of the “investors” to file their “complaints.”
At the end of September, it emerged that the company's founder, a self-made man, now a lover of yachts, but born in 1958 in a rural village plagued by hunger during the tragic era of the Great Leap Forward, was under police surveillance.
The last chapters of the script of the great Chinese real estate bubble were beginning to be written.
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