A Hong Kong court has ordered the liquidation of China Evergrande Group, the world's most indebted property developer with over $300 billion in total liabilities. The decision comes more than two years after Evergrande defaulted on a bond repayment and follows several court hearings where the company failed to present a concrete restructuring plan.
The ruling by Justice Linda Chan is expected to have significant implications for China's financial markets, which are already grappling with the fallout from Evergrande's debt crisis. The liquidation order raises concerns about the treatment of foreign creditors and adds to the challenges facing Chinese authorities as they navigate a complex and potentially politically sensitive process.
Evergrande's chief executive, Siu Shawn, assured that the company would ensure the delivery of home building projects despite the liquidation order. He stated that the decision would not impact the operations of Evergrande's onshore and offshore units. However, the announcement led to a significant drop in Evergrande's shares, with trading being halted in the company and its listed subsidiaries.
The liquidation of Evergrande, with $240 billion in assets, is expected to be a prolonged and complicated process, with uncertainties about the seizure of assets and the repayment rank of offshore bondholders. The ruling is likely to further impact China's capital and property markets, which are already facing challenges amid an underperforming economy and a struggling property sector.
Evergrande had been working on a $23 billion debt restructuring plan with a group of creditors for almost two years, but the lack of progress and engagement with the ad hoc bondholder group led to the liquidation order. The ruling may have little immediate impact on Evergrande's operations, including ongoing construction projects, but it adds to the uncertainties surrounding the company's future.
(With Reuters inputs)
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