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Debt-ridden Evergrande faces liquidation order from Hong Kong court

By newseditors // 2024-01-29

In a significant development in China’s real estate crisis, The beleaguered property giant Evergrande has been ordered to liquidate by a Hong Kong court. The decision, delivered by Judge Linda Chan, comes after Evergrande failed to present a viable restructuring proposal for its staggering $325 billion liabilities, making it a symbol of China’s real estate market woes. (Article by Blessing Nweke republished from YourNews.com) The default of Evergrande two years ago already had a profound impact on global financial markets. Now, with the court-ordered liquidation, concerns are escalating, causing a more than 20% drop in Evergrande shares in Hong Kong, leading to a suspension of trading. China’s property sector, contributing to a quarter of the world’s second-largest economy, faces potential turmoil, impacting the ongoing efforts by authorities to curb a stock market sell-off. The liquidation process involves seizing and selling off assets to repay outstanding debts, but whether this will occur depends on the Chinese government Top Shine Global, an investor, initiated the case in June 2022, claiming Evergrande failed to honor an agreement to repurchase shares. However, this dispute represents only a fraction of the company’s extensive debts, primarily owed to mainland Chinese lenders. Despite the Hong Kong court order, Evergrande’s fate remains uncertain, given the complexities of jurisdictional issues between Hong Kong and mainland China. The Chinese Communist Party, seemingly committed to supporting developers, may downplay the Hong Kong court’s decision to ensure ordinary homebuyers receive their properties. The liquidation order does not immediately halt Evergrande’s construction work, as subsidiaries remain unaffected. A provisional liquidator will likely be appointed, followed by a formal liquidator after creditor meetings. However, recovery prospects for unsecured creditors, especially foreign ones, are dim, with mainland creditors taking precedence. Judge Chan’s orders send a strong message, reflecting potential challenges for other defaulted developers like Sunac China, Jiayuan, and Kaisa. Evergrande, working on a new repayment plan, filed for bankruptcy in the US in August, signaling a bid to protect its American assets. The chairman, Hui Ka Yan, faced police surveillance the following month. As the situation unfolds, questions arise about how offshore liquidators will be treated by onshore stakeholders amidst significant local creditors and considerations. The repercussions extend beyond Evergrande, shaping the landscape for developers and creditors in China’s tumultuous real estate market. Read more at: YourNews.com

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