Evergrande Group has once again managed to stave off threats of liquidation, as a winding-up petition hearing brought against the deeply indebted Chinese property developer was adjourned in a Hong Kong court until January 29th. This latest reprieve buys Evergrande more time to negotiate a debt restructuring plan with creditors and avoid collapse.
Background on Evergrande’s Debt Crisis
Once China’s top-selling property developer, Evergrande has been struggling under the weight of over $300 billion in liabilities since last year. Evergrande aggressively took on debt to fund rapid expansion and diversification in areas from electric vehicles to theme parks.
However, tightened borrowing restrictions on overleveraged Chinese property developers combined with declining home sales have left Evergrande unable to service its enormous debts. The company began defaulting on payments to bondholders and suppliers last year, with its liquidity crisis also impacting homebuyers and the broader Chinese economy.
Evergrande narrowly avoided default in the past by negotiating payment extensions and selling off assets. But options have dwindled, with creditors losing patience and increasingly turning to legal action.
| Key Events in Evergrande’s Downfall |
|-|
| Sept 2021 | Evergrande warns it may default on loans unless it raises cash, sparking global market selloff |
| Dec 2021 | Declared in default by international rating firms after missing payments |
| March 2022 | Evergrande completes sale of stake in internet services firm, raising $1.5B |
| July 2022 | Customers occupy Evergrande office demanding refunds on unfinished projects |
| Sept 2022 | Unit stops paying some banker and supplier debts |
| Nov 2022 | Creditors file winding-up petition against Evergrande |
In November, an offshore creditor group filed a winding-up petition to liquidate the company’s main property services unit over unpaid dues. This set the stage for a decisive court hearing on Evergrande’s fate.
High Stakes Court Hearing Adjourned Again
Evergrande’s winding-up petition hearing was originally set for December 5th. If the winding-up petition brought by the offshore creditor group was approved in court, it could have forced Evergrande into runoff liquidation.
Instead, the hearing was adjourned until December 14th after the developer requested more time. On December 14th, with liquidation looming again, Evergrande won another delay, pushing the hearing to January 31st, 2023.
And once again today, Evergrande successfully petitioned for the high-stakes hearing to be pushed back even further. With the next court date now set for January 29th, Evergrande lives to fight another day.
While it continues to operate, Evergrande will keep trying to pull together a comprehensive debt restructuring plan that can placate enough creditors and keep liquidation at bay.
What Comes Next for Evergrande
Buying time in court may only be prolonging the inevitable, with Evergrande still facing long odds of emerging intact from this crisis.
Most analysts give low chances that Evergrande can restructure while preserving much shareholder value. Foreign creditors especially are playing hardball, demanding Evergrande equity in exchange for debt relief.
There is also still uncertainty around support from Beijing, which seeks to limit fallout but has not bailed Evergrande out as it did other troubled developers.
If no agreement can ultimately be reached, liquidation remains on the table. But Chinese authorities want to avoid the destabilizing impacts of a chaotic collapse.
An orderly restructuring or managed winding down of Evergrande’s sprawling empire seems the most likely path forward. Either outcome would fundamentally reshape China’s property sector, as Beijing cracks down on excessive leverage.
For now, Evergrande lives on thanks to courthouse reprieves, even as its longer-term prognosis remains dicey. All eyes will be on late January, when Evergrande faces a judge yet again with its fate hanging in the balance.
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