Evergrande granted last opportunity to approve debt arrangement

A judge in Hong Kong’s High Court has granted struggling Chinese property company Evergrande a final opportunity to propose a new agreement to handle its massive debts. If Evergrande fails to do so, it may be required to cease operations and sell off its assets.

A scheduled hearing, originally planned for Monday, was postponed to 4 December.

Justice Linda Chan said that this hearing would be the final one before a decision is made.

Evergrande is a company that owes a lot of money. They have over $325 billion of debt. They are a property developer.
It stopped paying back the money it owed two years ago and has been trying to come up with a new way to pay it back since then.

Justice Chan stated that Evergrande needed to present a specific plan, or else there was a high possibility that the company would be forced to close down. A liquidator can still talk with the people or businesses that are owed money, she said.

Evergrande did not respond right away when the BBC asked for their thoughts.

The situation started when Top Shine Global, a company that invested in Evergrande’s subsidiary called Fangchebao, filed a lawsuit in June 2022.

Evergrande did not keep their promise to buy back the shares that the investor had purchased.

Evergrande recently faced a big problem when it was announced that its founder and one of its main subsidiaries are being investigated for possible criminal activities. This puts a halt to their plans to revise agreements with their creditors.

The company also mentioned that Chinese regulators did not allow it to issue new dollar bonds. This was important for the company’s plan to fix its debts.

The votes by creditors on its plan to change how it does things were also cancelled. The votes were supposed to happen at the end of last month.

Evergrande has borrowed a lot of money from people in China, including regular citizens whose houses are not yet built.

When the company couldn’t pay its big debts in 2021, it caused a lot of worry in the worldwide financial markets because the real estate industry makes up about a quarter of China’s economy.

Many big real estate companies in the country have not been able to pay back their debts in the past year, and many are having difficulty finding enough money to finish their construction projects.

Evergrande needs to create a payment plan that its creditors will approve of within the next five weeks. However, it has been unable to do so in the past two years.

So far, the company has been able to stay in business because most of the money it owes is to lenders in China, who have a hard time getting their money back legally.

In contrast, people who loaned money to the company from other places can sue the company. Top Shine has completed certain actions, and these actions could lead to a court order for the company to be liquidated.

However, closing down the business and selling its assets would not completely solve the problem in a straightforward manner. Experts believe that it would make the situation much more difficult.

Eveline Danubrata, Asia Managing Editor at REDD Intelligence, said that even if offshore creditors successfully force Evergrande to close down and sell its assets to pay off debts, it is still uncertain if they will be able to get their money back.

The majority of Evergrande’s possessions are located in China. So the company will have to handle many different people in the area, like people buying homes, banks, and government officials,” she said.

Besides determining which lenders have the highest priority in a liquidation process, there is also a concern about who will complete the homes that over a million Chinese individuals are patiently awaiting Evergrande to deliver.

Ms Danubrata said it is difficult to imagine a situation where foreigners who have lent money get paid before Chinese people who own homes. In the end, any solution will probably need a lot of collaboration with the Chinese government.

“It would be difficult to take legal action against Evergrande’s assets onshore without approval from the authorities,” she explained.