A Hong Kong court on Monday adjourned to next month a hearing over a petition for the liquidation of China Evergrande (3333.HK). The world’s most indebted property developer assured it would “refine” a proposal to restructure its $300 billion of total liabilities in the next five weeks. It lobs the ball back to Beijing: the judge told Evergrande to hold direct discussion with “relevant authorities” on the revamped terms.
Options are limited following the detention of the company’s Chair Hui Ka Yan in September on suspicion of unspecified crimes. For now, Evergrande is barred by Chinese regulators from issuing new bonds. It has since offered creditors a 30% stake in each of its auto and property management units that boast a combined market value of about $1 billion. However, the latter filed a lawsuit last week, effectively turning itself into another aggrieved creditor of its parent. Not everyone is happy. Moelis, an advisor to a group of offshore creditors, will seek liquidation if there is no improvement to the restructuring plan.
It also defers a high-profile test on whether Hong Kong liquidation rulings over mainland companies would be implemented across the border more efficiently following the introduction of a limited mutual recognition pact in 2021. The current status quo means such insolvency proceedings can take years. Everyone will have to hold their breath a little longer. (By Chan Ka Sing)
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