Evergrande gets wound up
On Monday, the Hong Kong High Court issued a wind-up order to China Evergrande Group.
- That makes Evergrande the fifth mainland developer – and by far the largest – to be ordered to liquidate by the Hong Kong High Court since 2021.
How we got here: It’s been a long grind for Evergrande and its offshore bondholders.
- The judge on the case granted seven adjournments in the hearing since a winding-up petition was filed in June 2022.
- In October 2023, Evergrande was barred from issuing new offshore notes due to an investigation into its domestic entity, Hengda Real Estate Group.
- The ban forced Evergrande to revamp its original restructuring proposal, which promised to exchange existing debt for newer securities.
- Its revised plan couldn't garner sufficient creditor approval.
No one’s happy about the outcome.
- Evergrande previously claimed offshore bondholders would recover only 3.4% of their investment if the firm gets liquidated.
So what happens next?
A court-appointed liquidator will take over Evergrande’s Hong Kong-listed parent company. - In theory, the liquidator can seize and sell all assets – including those in mainland China.
Get smart: Beijing is desperate to prevent Evergrande's downfall from impacting the broader domestic economy – that means ensuring the beleaguered developer delivers unfinished housing, pays suppliers, and settles debt with onshore creditors.
- As such, it's a near certainty that mainland courts won't recognize the Hong Kong court-appointed liquidator's authority to seize Evergrande's mainland assets.
- That's good for China's macroeconomic stability, but lousy news for Evergrande's offshore creditors.