Explainer-What happens next after China Evergrande ordered to liquidate?

By Clare Jim and Scott Murdoch

HONG KONG (Reuters) – A Hong Kong court on Monday ordered China Evergrande, the world’s most indebted developer, to be liquidated.

The move could send shockwaves through already fragile Chinese capital and property markets. Such a process could be complicated, with potential political considerations, given the many authorities involved.

WHAT HAPPENS AFTER THE COURT ORDERS EVERGRANDE LIQUIDATED?

Once a liquidation order is issued, a provisional liquidatorand then an official liquidator will be appointed to takecontrol and prepare to sell the developer’s assets to repay itsdebts.

The liquidators could propose a new debt restructuring planto offshore creditors holding $23 billion of debt in Evergrandeif they determine the company had enough assets or if a whiteknight investor appeared. They would also investigate thecompany’s affairs and could refer any suspected misconduct bydirectors to Hong Kong prosecutors.

Evergrande could appeal a liquidation order, but theliquidation process would proceed pending appeal.

Shares in Evergrande and its listed subsidiaries were suspended from trading after the liquidation order. Listing rules require a company to demonstrate a business structure with sufficient operations and asset values.

HOW MUCH DEBT MIGHT CREDITORS RECOVER AND WHAT ARE THE MAINCHALLENGES?

Evergrande cited a Deloitte analysis during a Hong Kongcourt hearing in July that estimated a recovery rate of 3.4% ifthe developer were liquidated.

However, after Evergrande said in September its flagshipunit and its chairman Hui Ka Yan were being investigated by theauthorities for unspecified crimes, creditors nowexpect a recovery rate of less than 3%.

Evergrande’s dollar bonds were bid at around one cent on thedollar on Friday.

Most of Evergrande’s assets have been sold or seized bycreditors, leaving its two units listed in Hong Kong -Evergrande Property Services Group and Evergrande NewEnergy Vehicle Group. Their combined marketcapitalisation had…