The headquarters of China Evergrande Group in Shenzhen, Guangdong province, China, were decorated with the company’s logo on September 26, 2021. REUTERS/Aly Song/File Photo
HONG KONG, Dec 4 (Reuters) – A court hearing tied to a liquidation petition filed against China Evergrande Group (3333.HK) has been postponed in a Hong Kong court to next month. This delay provides more time to finalize a debt restructuring proposal, offering a major relief for the embattled developer.
The hearing has been adjourned to Jan. 29, an unexpected move on Monday, after Evergrande’s lawyers requested more time, stating that no creditors were actively seeking liquidation. On Oct. 29, when rescheduling the hearing to Monday, Hong Kong High Court Justice Linda Chan had indicated that the next hearing would be the final one before a decision was made on liquidating Evergrande.
Following Monday’s adjournment order, Evergrande shares made a dramatic recovery, surging more than 13% after experiencing earlier losses. The world’s most indebted property developer, Evergrande, with over $300 billion in liabilities, defaulted on its offshore debt in late 2021, becoming emblematic of a debt crisis that has since swept through China’s property sector.
Last week, Evergrande scrambled to piece together a revised restructuring plan in an attempt to avoid a potential liquidation order. After Monday’s adjournment, a representative of investment bank Moelis & Co, an advisor to a group of offshore Evergrande creditors, expressed surprise at the decision.
The creditors opposed the latest restructuring plan and will seek liquidation if the terms don’t change, noted the advisor. The Evergrande lawyer told the court that the developer expected to “refine” its restructuring proposal in the next five weeks. The judge asked Evergrande to hold direct discussions with relevant authorities on the revamped terms.
Liquidation of Evergrande, with $240 billion in assets as of June-end, would add more pressure to the already struggling property sector, which accounts for a quarter of the world’s second-largest economy.
Evergrande’s debt issues have been a major concern for global investors amid a struggling post-pandemic recovery, with property sales slowing and hundreds of thousands of homes left unfinished across the country. Authorities have announced a string of measures to revive the property sector, destabilized in the last few years by the debt woes of giants like Evergrande and Country Garden (2007.HK).
Evergrande has been working on a debt revamp plan for nearly two years. Its original plan was derailed in late September when its billionaire founder Hui Ka Yan was confirmed to be under investigation for suspected criminal activity. The developer did not obtain Chinese regulatory approval to issue new U.S. dollar bonds, a crucial part of the restructuring plan. As a result, the developer has not held a creditor vote on the plan.
Top Shine, an investor in Evergrande unit Fangchebao, filed the liquidation petition in June 2022 because it said Evergrande had not honored an agreement to repurchase shares the investor bought in the unit.
Reporting by Clare Jim; Writing by Sumeet Chatterjee; Editing by Kim Coghill and Christopher Cushing
Our Standards: The Thomson Reuters Trust Principles