The Hong Kong High Court has postponed the hearing to wind up Evergrande, the troubled Chinese real estate giant, to December 4. This hearing is pivotal, as it's the final opportunity for Evergrande to present a concrete restructuring proposal before the court considers liquidation. Evergrande, struggling with massive debt, defaulted on its offshore debt in 2021 and had been working on a restructuring plan. However, the recent investigation of its founder and regulatory restrictions on issuing new bonds have complicated the process. The court's decision has added immense pressure on the company, emphasizing the need for a viable restructuring plan. A liquidation could have broader implications on China's real estate sector, and its ongoing projects would continue without immediate impact.
In a significant development, the Hong Kong High Court has agreed to adjourn the hearing to wind up Evergrande, the embattled Chinese real estate giant, to December 4. Justice Linda Chan clarified that the upcoming hearing would be the final one before a decision is made on liquidating the company. She emphasized that Evergrande must present a concrete and revised restructuring proposal before the given date; otherwise, the firm could face winding up.
Evergrande, burdened with over $300 billion in liabilities, defaulted on its offshore debt in late 2021, becoming emblematic of the debt crisis that has gripped China's property sector. The company had been working on a $23 billion offshore debt restructuring plan, which faced hurdles when its founder, billionaire Hui Ka Yan, became the subject of a criminal investigation last month. Due to the investigation, mainland regulators prohibited Evergrande from issuing new dollar bonds, a crucial element of its restructuring plan.
Evergrande's lawyer informed the court that the company intends to "monetize the value" of its two Hong Kong-listed units. In recent weeks, Evergrande has reached out to certain bondholders with a revised restructuring plan, allowing them to swap bonds into equity and bonds linked to two listed subsidiaries, Evergrande Property Services Group and Evergrande New Energy Vehicle Group. Notably, this proposal no longer involves issuing new notes by China Evergrande.
If Evergrande fails to present an acceptable restructuring plan, the prospect of liquidation looms large. The court's decision puts immense pressure on the company, signaling a clear message that this is the final opportunity to propose a viable restructuring plan satisfactory to creditors.
The market reacted sharply to this news, with Evergrande's shares plummeting by 9.8% during the day. Despite the market's turmoil, a liquidation of Evergrande would not immediately impact its ongoing operations, including various home construction projects.
In a related development, Logan Group, another property developer facing financial challenges, also saw its winding-up order adjourned to December 4 by the same court. Logan Group announced last year that it would suspend interest payments and restructure its offshore debt, including $3.7 billion in dollar bonds, due to liquidity pressures.
These developments reflect the ongoing challenges faced by Chinese real estate companies in a sector that constitutes approximately a quarter of the world's second-largest economy's activity. The uncertainty surrounding Evergrande and similar companies continues to create ripples in global markets, underscoring the importance of stable financial conditions for these entities.
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