HK court orders China Evergrande to liquidate with debts of $300 billion

By Clare Jim and Xie Yu

HONG KONG (Reuters) -A Hong Kong court on Monday ordered the liquidation of property giant China Evergrande Group, a move likely to send ripples through China’s crumbling financial markets as policymakers scramble to contain a deepening crisis.

Justice Linda Chan decided to liquidate the world’s most indebted developer, with more than $300 billion of total liabilities, after noting Evergrande had been unable to offer a concrete restructuring plan more than two years after defaulting on a bond repayment and after several court hearings.

“It is time for the court to say enough is enough,” said Chan, who will give her detailed reasoning later on Monday.

Evergrande chief executive Siu Shawn told Chinese media the company will ensure home building projects will still be delivered despite the liquidation order. The order would not affect the operations of Evergrande’s onshore and offshore units, he added.

The decision sets the stage for what is expected to be drawn-out and complicated process with potential political considerations, given the many authorities involved. Offshore investors will be focused on how Chinese authorities treat foreign creditors when a company fails.

“It is not an end but the beginning of the prolonged process of liquidation, which will make Evergrande’s daily operations even harder,” said Gary Ng, senior economist at Natixis. “As most of Evergrande’s assets are in mainland China, there are uncertainties about how the creditors can seize the assets and the repayment rank of offshore bondholders, and situation can be even worse for shareholders.”

Evergrande’s shares were trading down as much as 20% before the hearing. Trading was halted in China Evergrande and its listed subsidiaries China Evergrande New Energy Vehicle Group and Evergrande Property Services after the verdict.

COMPLICATED PROCESS

Evergrande, which has $240 billion of assets, sent a struggling property sector into a tailspin when it defaulted on its debt in 2021…