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# Hong Kong High Court Gives Evergrande One Last Chance to Resolve Debts

By Nick Marsh, Asia Business Correspondent
Updated 30 October 2023, 04:11 GMT (45 minutes ago)

*Image source: Getty Images*

**A winding-up hearing, initially scheduled for Monday, has been adjourned to 4 December.**

A Hong Kong High Court judge has granted Evergrande, the crisis-hit Chinese property giant, a final opportunity to come up with a new agreement to settle its massive debts. Justice Linda Chan declared that this would be the last hearing before a decision is made. Evergrande currently holds the title for being the world’s most indebted property developer, with over $325bn (┬ú268.4bn) in total liabilities. It defaulted on its debts two years ago and has since been working on a new repayment plan, which it has failed to deliver.

Justice Chan emphasized that Evergrande must present a “concrete” proposal; otherwise, the company will likely face liquidation. She added that a liquidator would still have the ability to negotiate with creditors, should this occur. However, Evergrande has not responded to the BBC’s request for comment.

The winding-up hearing, which adjourned to 4 December, stems from Top Shine Global’s legal action against Evergrande in June 2022. As an investor in Evergrande unit Fangchebao, Top Shine Global alleged that the company failed to fulfill its agreement to repurchase shares purchased by the investor.

The company’s plans to restructure its agreements with creditors have suffered setbacks recently. Evergrande confirmed last month that its founder Hui Ka Yan and one of its main subsidiaries are under investigation for suspected criminal activities. Additionally, Chinese regulators prohibited Evergrande from issuing new dollar bonds, a crucial element of its debt restructuring plan. The company also canceled scheduled votes by creditors on its restructuring plan, further complicating the situation.

Most of Evergrande’s debt is owed to individuals within China, including ordinary citizens whose homes remain unfinished. The default on its massive debts in 2021 sparked global financial market concerns, as the property sector accounts for approximately a quarter of China’s economy. Other major real estate firms in the country have also defaulted over the past year, struggling to obtain funds to complete their projects.

Evergrande now faces a five-week deadline to devise a repayment plan acceptable to its creditors, a feat it has failed to achieve in the last two years. While the company’s survival has been partially reliant on the limited legal options available to lenders in China, creditors outside mainland China have the right to initiate legal proceedings against Evergrande. Top Shine’s actions could potentially trigger a court liquidation order.

However, a liquidation process would not bring a clean resolution to the matter. Analysts argue that it would significantly complicate the situation. Eveline Danubrata, Asia Managing Editor at REDD Intelligence, stated that even if offshore creditors succeed in liquidating Evergrande, the prospects of recovering their investments remain uncertain. With most of Evergrande’s assets located in China, the company must navigate the interests of various local stakeholders, including homebuyers, banks, and government officials.

Aside from determining the order of priority for lenders in a liquidation, there is also the issue of completing the homes that over a million Chinese individuals are still waiting for Evergrande to deliver. It is unlikely that foreign creditors would receive their payments before Chinese homeowners. Ultimately, resolving this situation will require significant cooperation with the Chinese government and likely necessitate onshore enforcement with the relevant authorities’ approval.

In conclusion, Evergrande has been granted a final opportunity to address its debt crisis before potentially facing liquidation. The company’s failure to present a viable proposal in the five-week period could have significant implications for its future. The AI legalese decoder can assist in navigating the complexities of the legal proceedings surrounding Evergrande’s debts, helping stakeholders assess potential outcomes and make informed decisions.

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