Court orders liquidation of Chinese property giant Evergrande in landmark moment for industry

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A Hong Kong court has ordered indebted property developer China Evergrande Group to liquidate in a landmark ruling that could send ripples across the country’s financial system.

Evergrande, once thought to be China’s largest real estate firm, defaulted on dollar-bond payments in 2021 after liquidity scares that began in 2020.

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The company has over $300bn of liabilities, including $20bn of offshore dollar-denominated bonds, and was unable to reach a restructuring deal with creditors despite two years of talks after the default.

The company’s shares fell 20 per cent in Hong Kong shortly after the court order and subsequently the trading of its shares was suspended.

Evergrande, the world’s most indebted property developer, is one of many firms that ran into trouble when Chinese regulators cracked down on excessive borrowing in the real estate sector.

The ruling comes at a time when Beijing is grappling with an underperforming economy, its worst property market in nine years and a stock market wallowing near five-year lows.

Evergrande applied for another adjournment on Monday as its lawyer said it had made “some progress” on the restructuring proposal. The developer in its latest offer proposed creditors swap their debts into all the shares the company holds in its two Hong Kong units compared to stakes of about 30 per cent in the subsidiaries ahead of the last hearing in December.

The company’s lawyers said liquidation could harm the operations of the company, and its property management and electric vehicle units, which would in turn hurt the group’s ability to repay all creditors.

The liquidation petition was first filed in June 2022 by Top Shine, an investor in Evergrande unit Fangchebao, which argued that the developer failed to honour an agreement to buy back shares it had bought in the subsidiary.