China’s Evergrande wins more time to restructure debts

The property developer Evergrande has been granted an extension until late January to try to restructure its debts and avoid liquidation in one of the most high-profile cases in China’s long-running property crisis.

Evergrande was once China’s biggest property developer, but a default on offshore debt obligations in 2021 started a lurch from one crisis to another. It has reported debts of more than $300bn (£237bn), much of it to individuals whose properties were never built.

The company is facing the prospect of liquidation after a creditor, Top Shine Global, filed a winding-up petition in Hong Kong that would put the company in the hands of liquidators who would then try to sell off its assets to pay its lenders. However, the case has dragged on as the company tries to reach a deal to extend its debts out of court.

Judge Linda Chan on Monday adjourned the case until 29 January, AFP reported. The judge had in late October given 4 December as the deadline before appointing independent liquidators from the accounting firm KPMG.

Evergrande’s share price rose by 9% in trading on Hong Kong’s stock exchange, although the company’s market value is less than 2% of what it was in early 2021, shortly before the default.

The default sent shock waves around China’s property sector, which had boomed on the back of cheap borrowing.

The company’s finances had been under severe scrutiny for years, before it was dealt another blow in September with its chairman and founder, Hui Ka Yan, under criminal investigation. In August, it filed for bankruptcy in the US in an effort to protect assets.

Lawyers for Top Shine Global said they were “instructed not to present any argument” against another adjournment, AFP reported. “So far as adjournment is concerned, we are reluctantly not opposing it,” said a lawyer in court.

The delay was not expected by some of Evergrande’s creditors. The Financial Times reported that Neil McDonald, a lawyer at Kirkland & Ellis who represents a group of offshore creditors, said that outside the court after the hearing on Monday, “we are very surprised by the developments” outside the court after the hearing on Monday.

The creditor group had opposed the restructuring proposal and had expected liquidation on Monday.

The judge on Monday told Evergrande to have “more direct discussion with relevant authorities” on whether they would assent to its restructuring plan, meaning that China’s government may have a role in deciding if the company can continue. It is unclear if a Hong Kong liquidation would be fully enforced in mainland China.

Source: The Guardian