A Hong Kong High Court judge has given crisis-stricken Chinese real estate colossus Evergrande one final opportunity to reach a new debt settlement or face liquidation.
Originally scheduled for Monday, a winding-up hearing has been adjourned until December 4. According to Justice Linda Chan, this will be the final hearing before a decision is made.
Evergrande is the most indebted property developer in the world, with total liabilities exceeding $325 billion (£268.4 billion). Since it defaulted on its debts two years ago, it has been developing a new repayment strategy.
Justice Chan stated that Evergrande was required to submit a "concrete" proposal or the company would likely be liquidated. She added that a liquidator could still negotiate with creditors.
In June 2022, the case was initially filed by Top Shine Global, an investor in Evergrande subsidiary Fangchebao. It stated that Evergrande had breached an agreement to buy back shares the investor had purchased in the company.
Evergrande's plans to renegotiate its agreements with creditors suffered a significant setback last month when the company confirmed that its founder Hui Ka Yan and one of its principal subsidiaries were under investigation for suspected criminal activity.
The company also reported that Chinese regulators prohibited it from issuing new dollar bonds, a key component of its plan to restructure its debts.
Votes by creditors on its restructuring plan, originally scheduled for late last month, were also canceled.
The majority of Evergrande's debt is owed to Chinese citizens, many of whom are ordinary citizens whose residences remain unfinished.
In 2021, when the company defaulted on its enormous debts, it sent shockwaves through global financial markets, as the property sector accounts for roughly a quarter of China's economy.
Several other significant real estate firms in the country have defaulted in the past year, and many are struggling to find the funds necessary to complete developments.
In the past two years, Evergrande has been unable to come up with a repayment plan that is acceptable to its creditors; it now has five weeks to do so.
Until now, the company's survival has been primarily dependent on the fact that the majority of the money it owes is to Chinese lenders with limited legal recourse.
In contrast, creditors from outside of mainland China are permitted to sue the company.
This is what Top Shine has done, which could result in a liquidation order from the court. However, liquidation would not completely remedy the issue. According to analysts, it would greatly complicate the situation.
In addition to determining which creditors receive primacy in a liquidation, there is the question of who will complete the homes that over a million Chinese citizens are still awaiting from Evergrande.
Ms. Danubrata stated that it is difficult to imagine a situation in which foreign creditors receive payment before Chinese householders. Ultimately, any solution will likely necessitate extensive collaboration with the Chinese government.
She said that it would be difficult to pursue an onshore enforcement action against Evergrande's assets without the approval of the relevant authorities.
