by Clare Jim and Xie Yu
HONG KONG (Reuters) – A Hong Kong court on Monday ordered the liquidation of developer China Evergrande Group, a move likely to cause major shocks to China’s already fragile financial and property markets and hamper efforts of Beijing to revive economic growth.
Evergrande, which has $240 billion in assets, defaulted on its debt in 2021, causing tremors throughout China’s real estate market, which has since fallen into a deep crisis.
Evergrande’s liquidation comes amid flagging confidence among investors and consumers, and as Chinese officials try to prop up an underperforming economy.
At least three other Chinese real estate developers had already been placed in liquidation by the Hong Kong courts since the start of the sector’s crisis in mid-2021.
“Enough is enough,” Judge Linda Chan said Monday, as Evergrande, more than $300 billion in debt, failed to make accurate communications or viable proposals.
The listing of Evergrande was interrupted, as were those of its subsidiaries, in the wake of the verdict.
However, it is not expected that this liquidation will have an immediate impact on the developer’s operations, particularly on its short-term construction projects.
The process could extend over months or even years, due to the many stakeholders, potential political considerations and the takeover of Evergrande’s various subsidiaries across mainland China – a separate jurisdiction from Hong Kong.
Evergrande worked for almost two years on a plan to restructure its debt before this project took a hit last September with the indictment of its founder, billionaire Hui Ka Yan.
Reuters had learned from sources familiar with the matter that a group of Evergrande creditors planned to support the promoter’s liquidation request.
This request was initiated in June 2022 in Hong Kong by Top Shine Global, an investor in the Fangchebao division of Evergrande, accusing it of not having respected a share buyback agreement it held.
(Reporting Clare Jim and Xie Yu; Jean Terzian)
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