Evergrande, Hong Kong Court Orders Liquidation

Chinese real estate giant Evergrande failed to reach an agreement with its creditors, so a Hong Kong court ordered its liquidation.

Over the weekend of January 27 and 28, intensive negotiations were underway to restructure the group’s offshore debt, but to no avail. So two years after the company failed to pay its bond with no concrete restructuring plans, Judge Linda Chan decided to liquidate the developer, whose total liabilities exceed $300 billion.

“It’s time for the court to say enough is enough,” the judge explained. According to Reuters, she clarified that the appointment of a liquidator would be in the creditors’ interest. Evergrande CEO Siu Shawn called the decision “very unfortunate.” He specified that despite the verdict, the company will continue to guarantee the construction of housing projects, thus protecting national and foreign investors.

Chinese financial newspaper 21st Century Business Herald quoted Siu Shawn as saying that “today’s verdict contradicts our original intentions. We can only say that we have done our best, and it is very unfortunate, the group will face difficulties and challenges and will take all appropriate legal action.” Thus, barring a possible appeal, the company made it clear that it would continue normal operations, “communicate actively with the liquidator, cooperate in accordance with the law in carrying out the relevant procedures, and follow international practice and market rules to facilitate debt settlement work and other key tasks, including securing the surrender of the estate,” Siu Shawn added.

Tiffany Wong, CEO of Alvarez & Marsal, the company appointed to liquidate, explained to Reuters that “the priority is that the majority of the operations are restructured and continue to operate. We will take a structured approach to preserve and return value to lenders and other stakeholders.”

The court’s decision in Hong Kong opens up a procedure that appears to be extremely complicated: most of Evergrande’s real estate is in China. Hong Kong and China have separate legal systems, and there is no guarantee that Beijing will abide by the ruling.