China Evergrande granted one last chance to avoid liquidation
The winding-up hearing for China Evergrande Group, the world's most indebted property developer with over $300 billion in liabilities, has been postponed by a High Court judge in Hong Kong until December 4. Evergrande, which defaulted on its offshore debt in late 2021, has become the symbol of China's ongoing debt crisis in the property sector. Justice Linda Chan declared that the upcoming hearing would be the final one before deciding on the winding-up order.
Judge's warning on restructuring proposal
Chan stressed the importance of Evergrande presenting a "concrete" revised restructuring proposal by the December 4 hearing. Otherwise, the company is likely to be wound up. She also mentioned that a liquidator could continue negotiating with creditors on restructuring and make headway toward reaching an agreement. The company's shares initially fell by 23% during the morning session on Monday, but later recovered to a 5% profit after the adjournment on Monday.
Bondholder's view on Evergrande's situation
A bondholder of Evergrande told Reuters, "I don't think anyone wants to see it liquidated. But right now, we don't see a better option could be offered by Evergrande, so the chance is still high that it would be wound up eventually." If Evergrande, which reported total assets of $240 billion as of end-June, were to be liquidated, it would cause further turmoil in the already unstable capital markets but is anticipated to have minimal immediate impact on company's operations.
Investigation into Evergrande's founder
Evergrande's offshore debt restructuring plan was disrupted last month when its founder Hui Ka Yan faced an investigation. In June 2022, Top Shine, an investor in Evergrande subsidiary Fangchebao, filed a winding-up petition, claiming Evergrande failed to repurchase shares as agreed. The investigation into Evergrande's founder and one of its key subsidiaries led to a prohibition on issuing new dollar bonds, affecting the restructuring plan. Creditor votes scheduled for late last month were also canceled.
Logan Group's winding-up order adjourned
In a related event, the winding-up order for fellow property developer Logan Group was also postponed by the same court to December 4. The Shenzhen-based company announced last year that it would halt interest payments and restructure its offshore debt, including $3.7 billion in dollar bonds, due to liquidity constraints. Since Logan began negotiations with offshore creditors to agree on proposed restructuring terms, bondholders report that little progress has been made in the restructuring talks.
