A court hearing into a liquidation petition filed against China Evergrande (HK:3333) Group was adjourned in a Hong Kong court to next month, allowing more time to finalise a debt restructuring proposal in a major relief for the embattled developer.
The hearing into the petition was adjourned to Jan. 29, the court said in an unexpected move on Monday, after Evergrande’s lawyers sought an adjournment, saying no creditors were “actively seeking” liquidation.
On Oct. 29, when adjourning the hearing to Monday, Hong Kong High Court Justice Linda Chan had said the next hearing would be the last before a decision was made on liquidating Evergrande.
After Monday’s adjournment order Evergrande shares reversed losses from earlier in the day to jump more than 13%.
Evergrande, the world’s most indebted property developer with more than $300 billion of total liabilities, defaulted on its offshore debt in late 2021 and became the poster child of a debt crisis that has since engulfed China’s property sector.
Evergrande last week scrambled to put together a revised restructuring plan to avoid a possible liquidation order.
After the adjournment on Monday, a representative of investment bank Moelis (NYSE:MC) & Co, an advisor to a group of offshore Evergrande creditors, said that they were surprised by the decision.
The creditors were opposed to the latest restructuring plan and will seek liquidation if the terms do not change, said the advisor.
The Evergrande lawyer told the court the developer expected to “refine” its restructuring proposal in the next five weeks. The judge asked Evergrande to hold direct discussion with “relevant authorities” on the revamped terms.
Liquidation of Evergrande, which listed $240 billion in assets as of June-end, would pile more pressure on the already reeling property sector, which accounts for a quarter of the world’s second-largest economy.
Evergrande’s debt woes have been a major concern for global investors at a time when the economy has struggled to mount a strong post-pandemic recovery, with property sales slowing and hundreds of thousands of homes left unfinished across the country.
Authorities have announced a string of measures to revive the property sector, destabilised in the last few years by the debt woes of giants like Evergrande and Country Garden.
Evergrande has been working on a debt revamp plan for almost two years. Its original plan was thrown off course in late September when its billionaire founder Hui Ka Yan was confirmed to be under investigation for suspected criminal activity.
The developer did not win Chinese regulatory approval to issue new U.S. dollar bonds – a crucial part of the restructuring plan – and, as a result, has not held a creditor vote on the plan.
Top Shine, an investor in Evergrande unit Fangchebao, filed the liquidation petition in June 2022 because it said Evergrande had not honoured an agreement to repurchase shares the investor bought in the unit.
