Evergrande reaches the end of the line.
In the future of the Shenzhen group, once among the most envied symbols of impetuous Chinese growth, there is liquidation: the High Court of Hong Kong issued the relevant order this morning for the lack of liquidation, despite the various postponements granted , of the restructuring plan with international creditors.
"It would be one of those situations in which the court would have to say enough and issue a liquidation order, which I intend to do", thundered Judge Linda Chan at the hearing, opening a new and unpredictable phase in the collapse of the most indebted real estate group in the world. world, crushed by a burden of 330 billion dollars.
The order came just over two years after the group's official default at the end of 2021, triggered by the liquidity crisis for Chinese real estate, which ended up in the grip of the Beijing authorities determined to stamp out the sector's excessive dependence on debt.
On the other hand, the decision is set to test the clout of Hong Kong courts in China: the pilot measure for mutual recognition and assistance in insolvency proceedings between the courts of the two parties, agreed in mid-2021, "It could face a real test, especially on the credibility of the former colony's international hub," a legal source noted to ANSA.
Although listed in Hong Kong, Evergrande has almost all of its assets and the vast majority of its liabilities in China.
In fact, creditors had low expectations and even before the ordinance they expected a recovery rate of under 3%.
What's worse is that real estate prices in the Dragon could take another hit from the Evergrande crash: an estimated 1.5 million home buyers have already paid the builder for unfinished homes the equivalent of an original value of around 90 billion dollars.
At an afternoon hearing, Edward Middleton and Tiffany Wong, of the company specializing in corporate restructuring Alvarez & Marsal, were appointed provisional liquidators, intending to meet the management to better understand the situation and discuss the next steps.
Shortly after the order, Chinese media reported that Evergrande CEO Shawn Siu called the move "very regrettable" and assured that the company would "do everything possible" to ensure the completion of real estate development projects. , crypticly noting that the operational structure of onshore and offshore subsidiaries was "unchanged" given that the liquidation had proceeded from a court based in Hong Kong.
Evergrande shares - with those of the subsidiaries Evergrande Nev and Evergrande Services - were suspended on the stock exchange after the sentence: they lost more than 20% to 0.16 Hk dollars, for a capitalization that collapsed to 275 million US dollars, compared to the peak of 56 billion in 2021. Hong Kong closed at +0.78%, with major Chinese real estate developers Country Garden - in default since 2023 - and Sunac up 1-3%.
The stock markets of Shanghai (-0.92%) and Shenzhen (-2.42%) performed poorly.
An agreement between Evergrande and international creditors fell through in September 2023 after the Chinese authorities failed to issue some authorizations, while the president and founder of the group, Hui Ka Yan, ended up under "mandatory measures" days later because he was suspected of "crimes" Evergrande, despite fears of a domino effect, is the piece in the balance that may not pose an immediate systemic financial threat to China,
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