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Court Orders Liquidation Of China Evergrande

A Hong Kong court on Monday ordered the liquidation of the property behemoth China Evergrande Group, striking a further blow to trust in the nation’s precarious real estate market as authorities are boosting attempts to manage an increasing crisis.

After noting that Evergrande had not provided a viable restructuring plan more than two years after going into default on its offshore debt and after multiple court appearances, Justice Linda Chan made the decision to liquidate the developer that was the most indebted in the world, with liabilities totalling over $300 billion.

While in court on Monday, Chan said that it is time for the court to say “enough is enough.”

Given the numerous authorities involved, investors will be watching to see if the Chinese courts would acknowledge Hong Kong’s verdict, setting the stage for what is anticipated to be an extensive and complex procedure with possible political ramifications. Offshore investors will also be interested in the way Chinese authorities handle international creditors when a firm collapses.

Chan named Alvarez & Marsal as the liquidator, stating that doing so would serve the interests of all creditors since it would allow the company to oversee a new Evergrande restructuring plan during the period that its chairman, Hui Ka Yan, is being investigated for possible crimes.

With $240 billion in assets, Evergrande’s 2021 debt default crippled the economy and threw a wrench in the already fragile real estate market. China’s already unstable real estate and finance markets are made even more unclear by the liquidation judgement.

The chief executive of Evergrande, Siu Shawn, told Chinese media that even with the liquidation order, the business will make sure house construction projects are delivered. He went on to say that the decision would not have an impact on how Evergrande’s offshore and onshore businesses operated.

Also, the managing director of Alvarez & Marsal, Tiffany Wong, said after the appointment, “Our priority is to see as much of the business as possible retained, restructured, and remain operational. We will pursue a structured approach to preserve and return value to the creditors and other stakeholders.”

Another managing director with Alvarez & Marsal, Edward Middleton, said the firm would promptly move to Evergrande’s headquarters.

Prior to the hearing, Evergrande’s stock was down as much as 20%. The decision resulted in the suspension of trading in China Evergrande and its listed companies, Evergrande Property Services and China Evergrande New Energy Vehicle Group.

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