"'Chinese Real Estate Giant' Evergrande May Enter Liquidation Process... Hearing in Hong Kong on 30th"

Liquidation Hearing at Hong Kong Court
Assuming 44.9 Trillion Won Debt
Asset Liquidation Upon Liquidation Order
Significant Impact Expected on Chinese Economy

The fate of Evergrande, the real estate developer at the epicenter of China's property crisis, will be decided on the 30th by the Hong Kong court. If Evergrande Group, which carries approximately $327 billion (442.7 trillion KRW) in debt, goes bankrupt, it will become the largest developer to have ever declared bankruptcy in Hong Kong.

Evergrande
Photo by Reuters Yonhap News

On the 30th, the Hong Kong High Court will hold a hearing to determine whether Evergrande will be liquidated. In June last year, investor Top Shine Global filed a liquidation petition, claiming that Evergrande failed to repay HKD 862.5 million (about 141.2 billion KRW) in debt.

This hearing is expected to be a decisive moment in judging Evergrande's chances of recovery. If Evergrande fails to present a concrete restructuring plan during the court hearing, a liquidation order will be issued. Once the liquidation order is issued, the court will appoint a liquidator to begin the process of converting Evergrande's assets into cash. The Chinese government has delayed final default processing for three years due to concerns about the shock Evergrande could cause to the market.

Among creditors, the prevailing view is that Evergrande's recovery is unlikely. When the lawsuit was filed last year, Evergrande stated that Top Shine Global's liquidation petition would not affect the company's restructuring schedule. However, as problems began to arise with the restructuring plan released in March the following year, Evergrande's recovery plan started to unravel. In September, new bond issuance failed due to investigations by Chinese authorities, and real estate sales figures announced that same month fell short of expectations. Ultimately, Evergrande announced the cancellation of a major overseas creditor meeting scheduled for September and disclosed the need to withdraw its restructuring plan.

As Evergrande's recovery prospects became uncertain, major offshore creditor groups other than Top Shine Global reportedly plan to join the liquidation petition if no concrete restructuring plan is submitted at the court hearing on the same day.

However, even if a liquidation order is issued, Evergrande's business operations are not expected to cease immediately. Bloomberg reported that Evergrande is likely to appeal, and the Chinese government might ignore the Hong Kong court's order.

Nevertheless, if Evergrande proceeds with liquidation, it is expected to cause widespread shock across the Chinese market. According to The Wall Street Journal (WSJ), as of June, Evergrande's debt exceeded $332 billion (449.4 trillion KRW). Since facing default, Evergrande has halted construction on hundreds of thousands of homes and failed to pay thousands of subcontractors. Moreover, considering that Evergrande grew by supplying small and medium-sized housing mainly in China's smaller cities, significant losses are expected to hit local economies in China.

Concerns are also rising that the default crisis in China's real estate market could spread like a domino effect. On the 25th, Country Garden declared default on its dollar-denominated bonds, further intensifying uncertainty in the real estate market.

Bloomberg warned, "If a liquidation order is issued for Evergrande, consumer confidence in the real estate market will decline, and strong shocks will spread throughout the real estate industry due to liquidity issues. If Evergrande fails to obtain regulatory approval for bond issuance, it will face an uncontrollable collapse."

This content was produced with the assistance of AI translation services.