HK court orders liquidation of property giant China Evergrande

HONG KONG, Jan 29 (Reuters): A Hong Kong court on Monday ordered the liquidation of property giant China Evergrande Group, dealing a fresh blow to confidence in the country's fragile property market as policymakers step up efforts 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 its offshore debt and following several court hearings.
"It is time for the court to say enough is enough," Chan said in court on Monday.
The decision sets the stage for what is expected to be a drawn-out and complicated process with potential political considerations as investors watch whether the Chinese courts will recognise Hong Kong's ruling, given the many authorities involved. Offshore investors will be focused on how Chinese authorities treat foreign creditors when a company fails.
Chan appointed Alvarez & Marsal as the liquidator, saying an appointment would be in the interests of all creditors because it could take charge of a new restructuring plan for Evergrande at a time when its chairman, Hui Ka Yan, is under investigation for suspected crimes.
Evergrande, which has $240 billion of assets, sent a struggling property sector into a tailspin and dealt a blow to the economy when it defaulted on its debt in 2021. The liquidation ruling creates further uncertainty for China's already fragile capital and property markets.
Evergrande chief executive Siu Shawn told Chinese media the company will ensure home building projects will still be delivered despite the liquidation order. The ruling would not affect the operations of Evergrande's onshore and offshore units, he added.
"Our priority is to see as much of the business as possible retained, restructured, and remain operational. We will pursue a structured approach to preserve and return value to the creditors and other stakeholders", said Tiffany Wong, managing director of Alvarez & Marsal after the appointment.
Edward Middleton, also managing director with Alvarez & Marsal, said the firm would immediately head to Evergrande's headquarters.
"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 per cent 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.
Beijing is grappling with an underperforming economy, its worst property market in nine years and a stock market wallowing near five-year lows, so any fresh hit to investor confidence could further undermine policymakers' efforts to rejuvenate growth.