NewsHong Kong court orders China Evergrande liquidation: a dramatic twist in global debt saga

Hong Kong court orders China Evergrande liquidation: a dramatic twist in global debt saga

The court in Hong Kong has decided to liquidate China Evergrande. This is bad news for the authorities in China.
The court in Hong Kong has decided to liquidate China Evergrande. This is bad news for the authorities in China.
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1:59 PM EST, January 29, 2024

Linda Chan, a Supreme Court Judge in Hong Kong, ordered the liquidation of Evergrande. She cited an "obvious lack of progress from the company" in presenting a feasible restructuring proposal and the company's insolvency.

Chinese developer enters liquidation

Media reports detailed how the company had been formulating a debt restructuring plan with a band of bondholders. The process had been ongoing for nearly two years, but no agreement was reached.

The company's management made a case arguing that the arrest of its founder, Xu Jiayin, who also goes by Hui Ka-yan, hampered their proposal presentation endeavors.

The lawsuit was initiated in June 2022 by an investor, Top Shine Global, based in Hong Kong. The investor stated that Evergrande failed to honor a share redemption agreement. Despite this, these outstanding dues are a mere fraction of Evergrande's total debt.

Impact on China's economy

The crumbling of Evergrande towards the end of 2021 marked the most extraordinary incident of the bursting bubble in the Chinese real estate market. The challenges this sector faces are perceived as one of the primary pressure points in the Chinese economy, which has been increasingly under duress as of late.

As per delayed financial data, Evergrande incurred a total loss surpassing $81bn in 2021 and 2022. The conglomerate's total debt exceeded $300bn.

The disclosed losses underline the magnitude of the real estate market downturn's impact on Chinese developers. For Evergrande, the plummeting property prices on one side and escalating debt costs on the other created an irresolvable predicament.

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