In a significant development, the hearing for a winding-up petition against China Evergrande Group has been adjourned to October 30th from the initial date of July 31st, as per the latest update in the Hong Kong court diary.
Evergrande’s Meeting with Creditors Delays the Hearing
The adjournment came at the behest of the petitioner, Top Shine Global Ltd, who sought to wait for the outcome of Evergrande’s crucial meeting with creditors scheduled for August 23rd. The purpose of this meeting is to vote on the offshore debt restructuring plan proposed by Evergrande.
A reliable source with direct knowledge of the matter confirmed this move, indicating the petitioner’s intention to gauge the potential impact of the restructuring plan before proceeding with the winding-up petition.
No Comments from Evergrande and Top Shine Global Ltd
In response to inquiries, both China Evergrande Group and the petitioner, Top Shine Global Ltd, declined to provide any comments on the matter. This adds to the intrigue surrounding the ongoing crisis faced by the embattled property giant.
Hong Kong Court to Decide on Sanction Hearings
On Monday, a Hong Kong court announced its decision to conduct sanction hearings on September 5th and 6th. These hearings will assess the restructuring plan’s viability and implications after the voting process.
Hope for Offshore Creditors
The voting process is crucial as it may potentially allow Evergrande’s offshore creditors to recover up to approximately one-quarter of their outstanding dues. Considering the mammoth size of Evergrande’s liabilities, this prospect offers a glimmer of hope for creditors who have anxiously awaited some form of resolution.
Evergrande’s Daunting Liabilities
China Evergrande Group finds itself at the epicenter of the country’s property sector crisis. With an astounding $330 billion in liabilities, it stands as the world’s most indebted developer. The situation escalated when a default occurred in late 2021, triggering a domino effect of defaults among other builders and leaving numerous residential projects incomplete across China.
Cautious Optimism Amidst Class-A and Class-C Debt Holders
As part of its restructuring plan, Evergrande faces the challenge of securing approval from holders representing more than 75% in creditor value in each debt class. In April, the company reported that 77% of class-A debt holders and 30% of class-C debt holders had indicated their support for the proposed plan.
Debt Restructuring Plan with Multiple Options
The March restructuring plan presented creditors with a range of options, including debt-to-bond swaps and equity-linked instruments. Evergrande’s management, in an effort to gain support for the plan, has cited an updated analysis commissioned from consultancy Deloitte. According to the analysis, the recovery rate from the proposed debt restructuring plan would be around 22.5%, a stark contrast to the mere 3.4% recovery rate if the company faces liquidation.
Winding-Up Petition Originates from Investment Dispute
The petitioner, Top Shine, has ties to Evergrande as an investor in the subsidiary company Fangchebao. In June 2022, Top Shine filed the winding-up petition in Hong Kong, alleging that Evergrande had not fulfilled an agreement to repurchase shares purchased by the investor in the said subsidiary.
In conclusion, the fate of China Evergrande Group remains uncertain as the hearing for the winding-up petition is adjourned, awaiting the results of the crucial creditor meeting and the subsequent sanction hearings. With immense liabilities and ongoing financial turmoil, the decisions made in the coming weeks will have far-reaching implications for Evergrande, its creditors, and the broader real estate industry in China.
