Impending liquidation: China's Evergrande gets postponement until the end of January
"What does the company intend to do in the coming weeks?" Judge Linda Chan asked the company'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.
Read also:
- Despite the postponement until the end of January, the imminent liquidation of Evergrande Group remains a major concern in China's construction sector.
- The Evergrande Group's crisis has led to a significant amount of debt, estimated to be over 300 billion euros, which has affected their ability to meet their financial obligations.
- With the liquidation process on hold, Evergrande gets a temporary reprieve, but it doesn't alleviate the pressure to find a solution to its financial troubles.
- Evergrande's creditor, who agreed to the postponement, might have some faith in the company's ability to restructure, but other creditors are less optimistic.
- If Evergrande does proceed with liquidation, it's uncertain whether a liquidation order issued in Hong Kong would be enforceable in China, given their different legal systems.
- The ever-present crisis in Evergrande has cast a shadow over China's construction sector, with investors and creditors eagerly watching for any signs of recovery or further setbacks.
Source: www.stern.de
