Evergrande, the world’s most indebted property developer, has been granted another extension to come up with a restructuring plan or face liquidation. The winding-up hearing, which was scheduled for October 30, has been adjourned until December 4, with a Hong Kong High Court judge stating that this would be the final delay before a decision is made.
With liabilities of over $300 billion and assets of $240 billion, Evergrande’s default on its offshore debt in late 2021 marked the beginning of a debt crisis that has swept through China’s property sector. The company’s troubles have had a significant impact on global markets and prompted intervention from Beijing to reassure investors and homeowners.
If Evergrande fails to present a viable restructuring proposal by the December 4 hearing, the company is likely to be wound up. However, a liquidator could still negotiate with creditors to reach a restructuring agreement before that point.
The potential liquidation of Evergrande, which accounts for a quarter of China’s property sector, would have far-reaching consequences for global capital markets. However, it is not expected to immediately affect the company’s ongoing operations, including its housing construction projects.
Evergrande had been working on a $23 billion offshore debt restructuring plan, but the process was disrupted when its founder, Hui Ka Yan, became the subject of a criminal investigation. The investigation led to mainland regulators prohibiting Evergrande from issuing new dollar bonds, a critical component of the restructuring plan, and canceling creditor votes that were originally scheduled for last month.
To overcome the regulatory hurdles, Evergrande plans to revise its restructuring proposal and focus on monetizing the value of its two Hong Kong-listed units, Evergrande Property Services Group and Evergrande New Energy Vehicle Group, which are not subject to the same restrictions.
So far, Evergrande’s proposed restructuring plan has failed to garner enough support from creditors. A lawyer representing a major bondholder group of Evergrande expressed support for the adjournment, stating that a restructuring plan could potentially offer a higher recovery rate for creditors compared to a liquidation scenario.
Meanwhile, Logan Group, another Chinese property developer, has also had its winding-up order adjourned until December 4. The Shenzhen-based company has been struggling with liquidity pressure and had previously announced the suspension of interest payments and a restructuring of its offshore debt.
Little progress has been made in Logan Group’s restructuring talks with offshore creditors since March. The company and its subsidiaries received a winding-up petition in November 2022 from a bond trustee representing some investors.