On the 30th, the Hong Kong High Court decided to proceed with a hearing to decide the liquidation of Evergrande. In June last year, investor Topshine Global filed a lawsuit for liquidation, claiming that Evergrande did not repay its debts of HK$862.5 million.
The hearing is expected to be a judge who will determine the possibility of Evergrande’s revival. If Evergrande fails to present a detailed plan for restructuring at the court hearing, a liquidation order will be issued. When the liquidation order is issued, the court will designate a liquidator and begin the process of cashing in Evergrande’s assets. The Chinese government has delayed the final bankruptcy process for three years for fear of Evergrande’s impact on the market.
Within creditors, the prevailing view is that Evergrande will be difficult to revive. When the lawsuit was filed last year, Evergrande stated that Topshine Global’s lawsuit for liquidation would not affect the company’s restructuring schedule. However, Evergrande’s rehabilitation plan began to get twisted as the restructuring plan released in March of the following year began to disrupt. In September, the issuance of new bonds failed due to an investigation by Chinese authorities, and real estate sales announced the same month also fell short of expectations. Eventually, Evergrande canceled a major overseas creditor meeting scheduled for September and announced a public announcement that it needed to withdraw its restructuring plan.
As the possibility of Evergrande’s revival has become unclear, Hengda’s major offshore creditor group, excluding Topshine Global, is also reportedly planning to participate in the liquidation petition if no specific restructuring plan is submitted at the court hearing.
However, if Evergrande goes through liquidation, it is expected to have a wide impact on the Chinese market as a whole. According to the Wall Street Journal (WSJ), Evergrande’s debt by June was reported to have exceeded $332 billion. Ever since facing a default, Evergrande has suspended hundreds of thousands of housing projects and failed to pay thousands of subcontractors. Moreover, given that Evergrande is a company that has grown by supplying small and medium-sized housing mainly in small and medium-sized cities in China, it is expected to cause great losses to China’s local economy.
