Justice Linda Chan, at the Hong Kong High Court, decided on Monday, January 29, to liquidate Chinese property developer Evergande, which has more than $300 billion of total liabiliies and around $240 billion of assets.
Although the full reason for the verdict has yet to be given, Justice Chan noted that no satisfactory restructuring plan has yet to be put in place two years after a default on a bond repayment.
The decision will be felt throughout the Chinese property market, although Evergrande has said it plans to finish any unbuilt homes across the country.
Lance Jiang, restructuring partner at law firm Ashurst, commented in a media release: “The market will pay close attention to what the liquidators can do after being appointed, especially whether they can achieve recognition from any of the three designated PRC courts under the 2021 Arrangement regarding Cooperation on Cross-border Insolvency Cases between the mainland and the Hong Kong SAR. The liquidators will have very limited powers of enforcement over onshore assets in mainland China if they cannot get such recognition.”
Jiang added: “If Evergrande is put into bankruptcy administration by a PRC court, international investors will need to see whether the PRC court-appointed administrator can work with the liquidators appointed by the Hong Kong court to achieve a transparent, cooperative and fair restructuring or liquidation of Evergrande.”
Trading was halted in China Evergrande and its listed subsidiaries China Evergrande New Energy Vehicle Group , and Evergrande Property Services after the verdict.
Some reports have suggested that creditors are only expecting a recovery rate of aroud 3%.
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