Evergrande ordered to liquidate as Hong Kong High Court approves creditors’ bid to wind up world’s most indebted property developer

Justice Linda Chan granted the winding-up order on Monday morning. The Guangzhou-based company can still appeal against the order. The provisional liquidator of the company will be named at a 2:30pm hearing today.

“The hearing has lasted for one and a half years, and the company still has not been able to bring forward a concrete restructuring proposal” to restructure its US$328 billion in liabilities, Justice Chan said in her ruling. “I think it is the time for the court to say enough is enough.”

The provisional liquidators will now take over Evergrande’s management and handle its affairs. This includes negotiating debt restructuring with creditors and taking control of its assets, books and records, in accordance with the liquidation procedures in Hong Kong.

Creditors will each have to complete and submit a proof of debt form to the provisional liquidators. They can also urge the liquidators to hold meetings to update them about the progress of the restructuring.

Evergrande’s Hong Kong staff can also claim certain unpaid salaries and dues from the Protection of Wages on Insolvency Fund, in accordance with relevant regulations.

The court order, however, faces cross-jurisdictional challenges as most of the company’s assets are located in mainland China. Evergrande has more than 1,200 projects at different stages of progress, ranging from near completion to under construction, according to its 2022 annual report.

Is Evergrande too big to fail?

“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 courts in the People’s Republic China under the 2021 Arrangement regarding Cooperation on Cross-border Insolvency Cases between the mainland and Hong Kong,” said Lance Jiang, a partner at Ashurst LLP. “The liquidators will have very limited powers of enforcement over onshore assets in mainland China if they cannot get such recognition.”

Today’s order ended Evergrande’s repeated lease on life, where it had been able to persuade the authorities continuously to grant it more time to work out its debt. It won its seventh reprieve on December 4 when creditors surprisingly failed to push for a liquidation. An ad hoc group of offshore creditors that collectively hold more than US$6 billion in offshore notes joined the petition to liquidate the company afterwards.

The debt restructuring plan promised by Evergrande’s team failed to materialise, “so why should the company still ask for further adjournment?” Justice Chan said in response to the developer’s plea for another adjournment.

Childhood dreams fuelled a debt binge that’s taken Evergrande to the brink

The lawsuit was initiated in June 2022 by Top Shine Global, whose ultimate beneficiary was Lin Ho-man, in an attempt to recover HK$862.5 million (US$110.4 million) from a botched investment in Evergrande made in March 2021.

Lin, 32, said in an interview with Tencent News earlier this month that he had offloaded his debt holdings in September by selling Top Shine, but did not offer details.