A Hong Kong court on Monday ordered giant company China Evergrande Group into liquidation, a move that has long been feared but is perhaps inevitable, putting China’s troubled real estate market at risk. This brings us one step closer to a major crisis.
Hong Kong judge Linda Chan I got it. Her ruling found Evergrande owed more than $300 billion and was unable to come up with a realistic restructuring plan despite two years of efforts.
A significant portion of that mountain of debt consists of real estate developments that are never completed and unfinished apartments that no one can live in. Evergrande has dozens of subsidiaries and owns real estate in hundreds of cities, but most analysts believe that its combined assets no longer exist. It’s worth as much as a debt.
“It’s time for the court to say enough is enough,” Chan said.
The court appointed a bankruptcy firm, Alvarez & Marsal, to begin disposing of Evergrande’s assets in order to return some value to investors and creditors.
This illustrated photo taken on September 27, 2021 in Krakow, Poland, shows the logo of China Evergrande Group displayed on a mobile phone screen and the Chinese flag displayed in the background. (Jakub Porzycki/NurPhoto via Getty Images)
Alvarez & Marsal Managing Director Tiffany Wong Said Her company’s goal was to “maintain, restructure, or continue to operate much of the business.”
“It is important to emphasize that the liquidation order is only issued against the parent company. It has no direct impact on the operations of its subsidiaries, especially those operating on the mainland. [China]” she pointed out.
“Our intention is to work with the existing management team to address the interests at issue and achieve a solution that minimizes further disruption for all stakeholders,” Wong said. Stated.
Wong’s reassuring statement appears to be intended to calm nervous Evergrande executives and encourage them to cooperate with the bankrupt company. If Evergrande does not fully cooperate with the Hong Kong court order, the case could be taken up by Chinese courts. This could either affirm China’s long-standing practice of recognizing Hong Kong court decisions, or, if China is right, invalidate Judge Chan’s ruling. The government has decided not to let foreign creditors eat up Evergrande’s assets.
Fergus Solin, a partner at the law firm Kirkland & Ellis, which represents a group of Evergrande’s creditors, said: Said He said his clients were “not surprised by the outcome” because Evergrande has a history of “failing to engage with us.”
“There is a history of last-minute involvement that never yielded any results. And in these situations, the only person responsible for the company being dissolved is itself,” Saurin said.
Foreign exchange traders watch a monitor in a foreign exchange dealing room in Seoul, South Korea, Monday, January 29, 2024. Asian markets had a strong week after Chinese regulators announced measures to help the debt-laden country’s struggling stock market. Development company China Evergrande has been ordered to liquidate. (AP Photo/Ahn Young Jun)
Evergrande CEO Xiu Xiu issued a statement on Monday calling the Hong Kong court’s decision “regrettable” and suggesting he expected mainland Chinese authorities to ignore it.
If Evergrande management does not cooperate, Alvarez & Marsal may attempt to replace them, but given the huge size of the real estate company and its numerous subsidiaries, hundreds of national and local Chinese Communist Party officials Approval will be required. Regarding such exchange plans.
The Chinese government may be reluctant to use authoritarian power to keep Evergrande together. First, blocking Alvarez & Marsal’s liquidation plan would invalidate the Hong Kong court’s judgment and further undermine Hong Kong’s status as a “front lobby” for Chinese corporations, a jurisdiction where foreign businessmen feel more comfortable. It will be a blow.
The outside world is wondering how China reacts to the failure of politically connected companies, especially when that failure could cause panic in China’s real estate industry and have disastrous effects on the unstable national economy. I’m looking forward to seeing how you deal with it.
“Other Chinese companies with assets in China, including developers Logan Group and Kaisa Group, are also facing liquidation requests in Hong Kong courts, and further liquidation requests are expected in the coming months,” Nikkei Asia said. I got it..
China Evergrande shares depressed It rose more than 20% in early Monday trading before the trading halt.Shares in other distressed Chinese real estate developers RoseBut they also include giant Country Garden Holdings, which investors say will begin the painful process of cleaning up Evergrande’s mess and shore up its remaining real estate sector. This may be a sign of optimism.
