China's Evergrande gets postponement until the end of January
The highly indebted Chinese construction group Evergrande has been granted a postponement until the end of January to avert the threat of liquidation. A Hong Kong judge postponed the deadline for the submission of a restructuring plan on Monday from December 4 to January 29. A creditor filed a winding-up petition against Evergrande in Hong Kong last year, and the proceedings have been dragging on ever since.
"What does the company intend to do in the next few weeks?" Judge Linda Chan asked the group's lawyers. "So far, we only have a general idea." Transparency is crucial, she emphasized. "It's not just about creditors in court."
Evergrande is at the center of the crisis in the Chinese construction sector. In 2020, China's authorities responded to the industry's escalating debt levels by imposing restrictions on borrowing. This led to payment defaults and project cancellations, particularly at Evergrande. In 2021, the group filed for insolvency proceedings. It has accumulated the equivalent of more than 300 billion euros in debt.
In March of this year, Evergrande offered its creditors to exchange their debts for new securities issued by the company and shares in two subsidiaries. In September, Group CEO Xu Jiayin was arrested in China and share prices plummeted. Trading in the construction group's shares was subsequently suspended, but resumed at the beginning of October. Official investigations into another subsidiary caused further uncertainty.
The creditor who had applied for liquidation accepted the postponement on Monday. However, other creditors were less than pleased. Hong Kong has its own legal system and is the preferred place of jurisdiction for foreign companies. However, it remains unclear whether a liquidation order issued by a Hong Kong court would be enforced in China.
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"Given the imminent deadline, the postponement until the end of January provides Evergrande with an opportunity to formulate a more concrete restructuring plan."
"Despite the postponement, some creditors remain skeptical, raising concerns about the enforceability of a liquidation order issued in Hong Kong within Chinese jurisdiction."
"The imminent postponement of Evergrande's liquidation until January, if successful, could mark a turning point in China's ongoing construction debt crisis."
Source: www.ntv.de
