An Evergrande sign is seen near residential buildings at an Evergrande residential complex in Beijing, China, September 27, 2023. Portal/Florence Lo/File Photo acquire license rights
- The hearing on the liquidation of Evergrande has been postponed to December 4th
- The judge says the delay will be the last before a decision is made
- Evergrande owes more than $300 billion and has assets of $240 billion
- Logan Group’s liquidation hearing has also been adjourned until December 4
HONG KONG, Oct 30 (Portal) – A hearing on Monday to break up China Evergrande Group (3333.HK) was postponed until Dec. 4, with a Hong Kong Supreme Court judge giving the world’s most indebted real estate developer one last chance submit a restructuring plan or face liquidation.
Evergrande, which has more than $300 billion in liabilities, defaulted on its offshore debt in late 2021, becoming the poster child of a debt crisis that has since gripped China’s real estate sector.
Judge Linda Chan told the court that the next hearing will be the last before the liquidation order is decided.
Evergrande must submit a “concrete” revised restructuring proposal before that date, she said, otherwise it is likely the company will be dissolved.
A bankruptcy trustee could still negotiate a restructuring with creditors and make progress toward an agreement, Chan said.
The company’s shares pared losses to 5% after Monday’s adjournment, after falling as much as 23% in the morning session.
“NO BETTER OPTION”
China’s real estate sector accounts for about a quarter of activity in the world’s second-largest economy. Its troubles have rattled global markets and prompted Beijing to take a series of measures to reassure investors and homeowners.
A liquidation of Evergrande, whose total assets stood at $240 billion at the end of June, would send further shockwaves to already fragile capital markets but is unlikely to have an immediate impact on the company’s operations, including its many homebuilding projects.
Evergrande had been working on a $23 billion foreign debt restructuring plan that was derailed last month when it confirmed that its billionaire founder Hui Ka Yan was under investigation for alleged criminal activity.
Due to an investigation into its flagship real estate division, Evergrande was blocked by mainland regulators from issuing new dollar bonds, a key part of its restructuring plan. Creditor votes originally scheduled for late last month were canceled.
Evergrande’s lawyer told the court on Monday that the company intends to revise the restructuring proposal to “increase the value” of its two Hong Kong-listed units, Evergrande Property Services Group (6666.HK) and Evergrande New Energy Vehicle Group (0708. HK) to “monetize”. ), which are not covered by the regulatory hurdles.
The March restructuring plan was proposed to creditors with a basket of options to swap debt for new bonds and equity-linked instruments, backed by the group and the two entities. However, sources said he did not receive enough support from any class of creditors.
A lawyer representing Evergrande’s large group of bondholders said at the hearing that the group supported the postponement because a restructuring plan could have a higher recovery rate for creditors than a liquidation scenario of less than 3%.
Evergrande did not respond to a request for comment.
“I don’t think anyone wants to see liquidation. But at the moment we don’t see a better option that Evergrande could offer, so there is still a high chance that it will be liquidated at some point,” said a bondholder. They asked not to be named because they were not authorized to speak to the media.
Top Shine, an investor in Evergrande unit Fangchebao, filed for liquidation in June 2022 because it said Evergrande had failed to honor an agreement to repurchase shares the investor had purchased in the unit.
LOGAN LIQUIDATION
The liquidation order of fellow property developer Logan Group (3380.HK) was also postponed to December 4 by the same court.
The Shenzhen-based company said last year that it would suspend interest payments and restructure its offshore debt, including $3.7 billion in dollar bonds, due to liquidity pressures.
Little progress has been made in restructuring talks since the company said in March it had begun negotiations with offshore creditors to agree to proposed restructuring terms, bondholders told Portal.
Logan did not immediately respond to a request for comment.
Logan and two of its subsidiaries received a liquidation petition in November 2022 filed by the bond trustee representing certain investors holding the 5.75% 2025 bonds.
Reporting by Clare Jim and Xie Yu in Hong Kong; Additional reporting from Scott Murdoch in Sydney; Edited by Lincoln Feast and Miral Fahmy
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