(Hong Kong) Hong Kong justice on Monday gave the massively indebted Chinese real estate giant Evergrande until the end of January to present its restructuring plans and try to avoid liquidation, after a deadline initially set for Monday.
Hong Kong High Court judge Linda Chan adjourned the case until January 29 and said Evergrande’s lawyer should speak more directly “with relevant authorities to confirm” that the restructuring proposal is feasible.
Evergrande, once China’s largest real estate developer, defaulted in 2021 and reported liabilities of more than $300 billion, becoming a symbol of China’s years-long real estate crisis and raising fears of an economic slowdown wider.
Last year, creditors filed a liquidation petition in Hong Kong against China Evergrande Group – which was set to begin the liquidation process – but the case dragged on as the parties attempted to negotiate an out-of-court settlement .
Ms Chan said in October that Evergrande would be given a “final adjournment” until December 4 to develop a concrete restructuring plan, or otherwise appoint independent liquidators from accounting firm KPMG.
In March, the real estate giant offered creditors the opportunity to exchange their debt for new securities issued by the company and shares of two subsidiaries, Evergrande Property Services Group and Evergrande New Energy Vehicle Group.
But negotiations were stalled in September when the company’s chairman, Xu Jiayin, was “subjected to coercive measures” by Chinese authorities on suspicion of breaking the law.
The company said the same month that it could not issue new bonds because its China subsidiary, Hengda Real Estate Group, was under investigation.
At the court hearing in October, Evergrande’s lawyers said the restructuring would focus on “monetizing” the two Hong Kong-listed subsidiaries. Evergrande estimated its debts at $328 billion at the end of June.
China’s construction and real estate sector once accounted for about a quarter of its GDP, thriving for decades on surging demand.
But the debt accumulated by its main players was seen by Beijing as an unacceptable risk to the Chinese financial system and to overall economic health.
Authorities have gradually restricted developers’ access to credit since 2020, and a wave of defaults has followed.
Hong Kong has a “common law” legal system, distinct from that of mainland China, favored by some foreign creditors as a place to liquidate failing Chinese manufacturers.
It remains unclear whether a liquidation order issued by a Hong Kong court can or will be enforced on the mainland.