After the hearing of the "winding-up petition" was adjourned for 18 months, China Evergrande finally pronounced its fate: it was "liquidated" by the Hong Kong High Court.
According to CCTV News and other ** reports, the Hong Kong High Court officially issued a "winding-up order" to China Evergrande on January 29. On the morning of the same day, Evergrande, Evergrande Automobile, and Evergrande Property all announced intraday suspensions.
Market analysis pointed out that Evergrande was "liquidated" by the Hong Kong High Court, becoming the largest developer liquidation case in Hong Kong so far, "and it may officially enter the bankruptcy process in the future." "In the event of bankruptcy, in the future, all the assets of Evergrande, a former leading enterprise in China's real estate industry, will be realized, shareholders will be cleared overnight, and creditors will be unable to return.
Regarding the "winding-up order", Sean Shawn, CEO of Evergrande Group, pointed out in his public response, "Evergrande will face difficulties and problems, take all legal and compliance measures, and steadily promote the normal operation of the group's business under the premise of protecting the legitimate rights and interests of domestic and foreign creditors. ”
The impact of "liquidation": shareholders are cleared overnight, and creditors are unable to return their capital
The hearing has been postponed several times before, and on June 24, 2022, the creditor Jiasheng Global filed a "winding-up petition" against Evergrande in the High Court of Hong Kong, involving a debt amount of about 8HK$62.5 billion.
At that time, the hearing was scheduled for August 31, 2022, and since then, Evergrande has submitted several applications for adjournment of the petition hearing, and has been granted adjournment of the winding-up hearing on seven occasions. Until January 29, the High Court of Hong Kong pointed out at the hearing that "Evergrande's debt restructuring plan lacked progress, the company was insolvent, and officially ordered Evergrande to 'wind up'." ”
What does a "winding-up order" mean? Shen Meng, executive director of Xiangsong Capital, pointed out to Sohu Finance, "In Hong Kong, 'liquidation' is similar to bankruptcy liquidation under mainland law. Evergrande is insolvent, then all shareholders' shares will be zero, and all assets will be disposed of to repay creditors. ”
According to the requirements of the Official Receiver's Office of Hong Kong, after the court makes a "winding-up order", a "provisional liquidator" will be appointed to take over the disposal of all realisable assets; If there is any remaining funds after deducting all costs and expenses, the liquidator will apportion the money to the creditors whose claims have been accepted.
Lawyer Yang Dengji, a partner at Guangdong Hebang Law Firm, said, "If Evergrande is confirmed to be "liquidated" by the Hong Kong court, all the company's assets will not be owned by Evergrande's shareholders, but by the "liquidated" company nominated by the court, and the company's Evergrande shares will be auctioned. After the completion of the liquidation process, Evergrande may eventually lose its financing platform in Hong Kong. ”
According to the financial report, as of June 30, 2023, Evergrande's assets totaled 1,744 billion yuan, including current assets of 1,578.5 billion yuan and total liabilities of 2,388.2 billion yuan, which has long been insolvent.
What's next for Evergrande? Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, told Sohu Finance that after passing the "winding-up hearing", the next process mainly includes the following steps: the liquidator will evaluate and auction the assets of Evergrande Group to raise funds to repay debts; The liquidator will give priority to mortgaged debts and other debts with priority; After the repayment of the senior debt, if there are remaining funds, they will be distributed to other creditors in proportion to the debt.
Finally, if there are still outstanding debts, Evergrande Group's assets will be depleted and the bankruptcy proceedings will be concluded. He noted.
In the process, Evergrands' shareholders are likely to lose the most. Evergrande's 2023 interim report data shows that as of June 2023, Xu Jiayin is the largest shareholder of China Evergrande, holding 5978% equity; Ding Yumei holds 599% equity; The remaining shareholding is held by minority shareholders.
Huang Lichong, president of Huisheng International Capital, pointed out to Sohu Finance, "On the one hand, most of the shareholders' returns are zero or very low. On the other hand, shareholders may be exposed to the risk of a refund of share capital payments received from the company within one year prior to the commencement of 'winding-up' proceedings, illegal dividends paid when the company became insolvent, and any other benefits or recoveries of property obtained through undervalued transactions or fraudulent transfers of property. ”
In addition to the shareholders of Hengda, creditors will also have no return. Generally speaking, the priority for repayment of debts of a company "wound up" in Hong Kong includes the members of the company, secured secured creditors, winding-up expenses, employee equity** debts, and unsecured creditors.
In addition, after the Hong Kong court issued a winding-up order, Evergrande was constrained by the fact that its assets were mainly in China, and there were also many constraints on recovering domestic assets, which also increased the difficulty of creditors to pay.
After entering the 'winding-up' process, the 'liquidator' will first take over the business of Evergrande's listed company and gradually take over the subsidiary. This process is difficult because many local companies are under pressure to secure delivery and liquidators may not have full control over the subsidiary. "Generally speaking, overseas creditors can probably only get what is left of the 'liquidation' of Evergrande's overseas assets. Huang Lichong said.
Shen Meng also said: "Judging from the current situation, Evergrande's creditors should not be fully repaid. ”
In fact, as early as March last year, Evergrande announced an overseas debt restructuring plan, and gave Evergrande an account to overseas creditors: once the overseas debt restructuring is unsuccessful and forced liquidation, the estimated overseas unsecured creditors of the company in the group-level liquidation are expected to be about 97$2.8 billion.
Among them, the expected ** rates of overseas unsecured creditors, existing Evergrande noteholders, existing Jingcheng noteholders, and overseas unsecured creditors of Tianji are ., respectively05%。
The restructuring has not been effectively promoted, and the "debt-turning" plan is pending
Why did Evergrande go to the "liquidation"? Since the second half of 2021, Evergrande has tried to save itself by means of ** assets and promoting debt restructuring. Four days before the receipt of the "winding-up order", Evergrande was still actively reducing its debts, announcing that the 65% interest in the ** project subsidiary would be exempted from 3$7.6 billion in debt.
Evergrande has come to the situation of "liquidation", and the delay in the restructuring of 22.7 billion US dollars of overseas debt is an important reason. As early as March last year, Evergrande disclosed an overseas debt restructuring plan, which will revolve around the issuance of new notes and pledges, ** Evergrande Property, and some shares of Evergrande Automobile.
Since then, Evergrande's overseas restructuring process has accelerated. According to the original plan, Evergrande will hold relevant scheme of arrangement meetings with creditors on September 25 and September 26 last year on the proposed restructuring.
However, on the eve of the meeting, Evergrande suddenly announced that "in view of the fact that the subsidiary Evergrande Real Estate is under investigation, the current situation cannot meet the qualifications for the issuance of new notes." Later, on the evening of September 28, Evergrande suddenly announced that "Xu Jiayin, chairman of the board of directors of the company, has been taken compulsory measures in accordance with the law on suspicion of violating the law and committing crimes." ”
Unable to meet the qualifications for the issuance of new notes, the actual controller Xu Jiayin was taken compulsory measures in accordance with the law, which caused Evergrande's overseas debt restructuring to be stranded.
Since then, Evergrande has also tried to restructure its debts. On October 20 last year, it was revealed that "the company is revising the terms of the proposed restructuring of overseas debts to match the company's objective situation and the requirements of creditors." ”
Judging from the result of Evergrande's "liquidation", Evergrande has not yet reached a unified opinion with creditors on the restructuring plan, and the Hong Kong court has completely lost its "patience".
The preliminary voting of creditors did not meet expectations, and Evergrande Real Estate has been investigated by the China Securities Regulatory Commission, the actual controller of the group has been taken compulsory measures in accordance with the law on suspicion of illegal crimes, and the company also believes that it cannot meet the relevant statutory conditions for the key aspects of overseas debt restructuring, which makes all kinds of uncertainties continue to intensify, so that the debt restructuring plan is finally difficult to land. Sean revealed in an interview.
In Shen Meng's view, "Evergrande had reached a restructuring agreement with creditors before, but it failed to move forward effectively, so it was ordered to be liquidated by the court." ”
And creditors have been going around with Evergrande for two and a half years, ushering in the results they least want to see. In Bai Wenxi's view, "for creditors, Evergrande's 'liquidation' may not be in line with their interests maximization. However, as far as the current situation of Evergrande is concerned, the hope of resuming operations through debt and asset restructuring and corporate restructuring is very slim, and promoting bankruptcy liquidation is also an option that creditors have no choice. ”
The likelihood of avoiding "liquidation" is extremely small
For Evergrande, which was issued a "liquidation order", is it still possible to turn around against the wind? Theoretically, Evergrande could also appeal against the Hong Kong court against the "winding-up order" and apply for the withdrawal of the "winding-up order".
For example, in May last year, Jiayuan International became the first Hong Kong-listed real estate company in the mainland to be forcibly "liquidated" in 2023, and then it appealed to the Hong Kong court. At present, Jiayuan International is still in "liquidation".
Recently, Jiayuan International issued an announcement saying, "Due to the significant challenges faced by participants in the real estate industry (including end users, developers, lenders and investors) and the great uncertainty of the timing of success, the 'liquidators' believe that it is unlikely to find suitable investors to resume trading in the company within the nine-month period." As such, the 'liquidators' will work with the senior management of the group to develop a restructuring plan for the relevant debts of the group. ”
The road of "liquidation" of Jiayuan International may provide a reference for Evergrande. A number of industry insiders pointed out that as far as the current situation is concerned, even if it is appealed, Evergrande is less likely to avoid being "liquidated", "If the company is unable to reach a debt restructuring agreement with creditors, or cannot find other solutions, the 'winding up order' may be finally issued." ”
In Huang Lichong's view, in the process of "liquidation", if there is a "white knight" who is willing to invest more than 100 billion yuan, propose a plan with creditors, and be accepted by the clearing judge, the court, and the creditors' meeting, then the "liquidation" may be stopped, "but this is only possible, this may be extremely slim." ”
Now, Evergrande's "liquidation" has also sounded the alarm for other real estate companies that are caught in liquidity risks.
Li Yujia, deputy director and chief researcher of the Guangdong Provincial Housing Policy Research Center, said, "The Evergrande incident shows that the high-level risk management of the real estate industry is to deal with the risk in accordance with the market under the premise of ensuring the delivery of the building, and will not be needless to bail out because of the delivery of the building and the risk of the industry." ”
For the real estate market, the future will be a big wave of the process, similar to Evergrande and other illegal operations, reckless, will be eliminated by the market, steady operation, long-term operation, financial health, will be retained, which is also the result of the new development model of the real estate industry. Recently, the state has promoted the white list of real estate projects and operating property loans, which is actually to support these retained enterprises. He noted.