|
Listen now
|
Property developer China Evengrade Group has been ordered to liquidate by a Hong Kong court, bringing an end to the yearslong saga of a company whose default rippled through the world’s second-largest economy.
The liquidation order came despite an 11th-hour push by the company’s creditors to reach a deal over the weekend, according to people familiar with the matter. It comes more than two years after the company defaulted on its dollar bonds, becoming one of the first dominoes to fall in China’s beleaguered real-estate sector.
“The time is for the court to say enough is enough,” said Judge Linda Chan in Hong Kong’s high court.
The judge said that Evergrande was given another adjournment in December to come up with a new restructuring deal, seek comments from the creditors, and get a legal opinion on the proposal. “None of that has happened,” Chan said.
Evergrande’s lawyer argued for another adjournment, saying that an immediate liquidation order would affect the value of the company’s offshore assets and subsidiaries, thereby damaging the potential recovery rate for creditors. But a lawyer for the main creditors group argued that Evergrande hadn’t negotiated with them in good faith, and the judge agreed.
Evergrande’s liquidation is likely to send another shock wave through the Chinese real-estate industry that already has seen dozens of developers collapse over the past two years as banks pulled back funding and property values underwent a sharp correction.
The company was once China’s biggest property developer by sales. But, saddled with some $300 billion in liabilities, Evergrande stopped paying its debts over two years ago and has been negotiating a restructuring with its creditors ever since.
The court order will give creditors control over Evergrande’s parent company and allow them to liquidate all of its businesses.
The court will now appoint a liquidator for Evergrande’s parent company. The liquidator will be empowered to take over all of Evergrande’s subsidiaries around the world, including in China, and sell the company’s assets to repay its debt.
Much of Evergrande’s assets have already been sold, seized by creditors or frozen by Chinese courts. The developer’s dollar bonds were bid below 2 cents on the dollar on Friday.
Shares of China Evergrande and its listed subsidiaries halted trading midmorning in Hong Kong. Evergrande’s shares fell 21% before the trading halt.
Evergrande’s default was a watershed moment for the Chinese real-estate industry and fueled a liquidity crisis in the sector. Since then, more than 50 developers have defaulted on their debts, and thousands of people in the sector have lost their jobs.
Follow the MoneyCentral Nigeria channel on WhatsApp: Click here!