The former real estate giant may now be facing dissolution. According to CCTV News, on January 29, a Hong Kong court issued a liquidation order to China Evergrande (03333.HK). As soon as the news came out, Evergrande's stock price plunged, falling 20.87% to HK$0.163, with a market value of only HK$2.218 billion. At the same time, Hong Kong stocks Evergrande, Evergrande Automobile and Evergrande Property were suspended from trading during the session.
In June 2022, Jiasheng Global filed the first liquidation petition against Evergrande to the Hong Kong court. Evergrande has proposed postponement of the liquidation hearing 7 times. The last time it was proposed was on December 4, 2023, and it was postponed to January 29, 2024.
Huang Lichong, President of Huisheng International Capital, said that once the court is satisfied that one of the requirements set out in Section 177(1) of the Company Winding Up Ordinance (including the company's inability to repay its debts), it can issue a winding up order against the company. The court will consider the wishes of the creditor and principles of fairness and justice. During a compulsory winding up, all proceedings against the company and actions by creditors are automatically stayed unless the court authorizes the commencement or continuation of such proceedings. In addition, the directors' powers will be suspended and a court-supervised liquidator will be responsible for recovering and realizing the company's assets, investigating the company's affairs, determining creditors' claims, and making distributions to creditors from the liquidation estate. Once the company has been wound up, the liquidator will apply to the court to relieve the liquidator from liability and dissolve the company.
Does being issued a liquidation order mean that Evergrande is ushering in the "end of the whole drama"? A capital market person told China Business News, "Theoretically not, Evergrande can still file an appeal," but the liquidation process will not be suspended.
Huang Lichong also said that after the judge issues a liquidation order, he will nominate a liquidator and take over the company's business. During this process, if Evergrande can propose some new restructuring plans, with the participation of white warriors, and after obtaining the support of the liquidator and then submitting them to the court and creditors' rights meeting, it is still possible to cancel or suspend the liquidation order.
However, the industry believes that with Evergrande’s huge debt, it is unlikely that a white warrior will emerge. As of June 30, 2023, Evergrande's main operating income was approximately 128.18 billion yuan, with a total net loss of 39.25 billion yuan; total liabilities reached 2.39 trillion yuan, and after excluding contract liabilities of 603.98 billion yuan, the liabilities were approximately 17,800 yuan. billion, an increase of approximately 67.83 billion yuan from the 2022 liability scale of 1.72 trillion yuan after excluding contract liabilities.
Evergrande has been promoting overseas debt restructuring for more than two years since it started overseas debt negotiations in December 2021. In March 2023, Evergrande proposed a debt restructuring plan, and the creditors' meeting originally scheduled to be held in August of the same year was postponed many times due to Evergrande Automobile's introduction of strategic investors and other actions. During the same period, Evergrande's main domestic subsidiary, Evergrande Real Estate, was investigated by the China Securities Regulatory Commission for breach of trust disclosure regulations. As a result, Evergrande was unable to meet the qualifications for the issuance of new notes.
Under the influence of multiple factors, on December 15, 2023, Evergrande announced that the term of each restructuring support agreement signed on April 3, 2023 has expired and has not been extended. Evergrande also stated that the company and its consultants will continue to discuss with the company's various stakeholders with a view to reaching a consensus agreement on the overall restructuring of the company's overseas debt. But so far, there has been no further progress in Evergrande’s debt restructuring.
Source: China Business News Author: Zheng Na