On January 29, there was a thunderclap in the capital market. Hong Kong's High Court unexpectedly ruled that China Evergrande was wound up, sounding the death knell for the property giant.
The word accident is not an exaggeration. Because the Hong Kong court has postponed Evergrande's liquidation hearing for 7 consecutive times. "The wolf is coming" shouted too much, and the market is no longer sensitive to Evergrande's liquidation hearing, after all, as long as conditions permit, this hearing can be postponed forever.
And just when the outside world didn't think so, the Hong Kong court made a final decision and announced Evergrande's "death sentence". After the news of the liquidation came out, Evergrande's listed companies were suspended in Hong Kong stocks. Among them, China Evergrande fell by more than 20%, Evergrande Automobile fell by more than 18%, and Evergrande Property fell by 25%。
After the liquidation of Evergrande, Sean, the executive president of Evergrande Group, shouted to ** for the first time.
Sean said that the subject of the offshore winding-up order issued by the Hong Kong court was China Evergrande, which is listed in Hong KongAt present, the management and operation system of Evergrande Group and other domestic and foreign subsidiaries as independent legal entities remain unchangedThe Group will continue to strive to do everything possible to ensure the stability of its business and operations in China.
In other words, the liquidation of China Evergrande will not have a substantial impact on the operation of Evergrande's domestic business.
The president of Evergrande said that the liquidation was indifferent, is this really the case?
Why was Evergrande liquidated?
The so-called winding-up is a debt repayment system under Hong Kong law. If the company owes money and does not pay it, creditors can file a bankruptcy petition in the Hong Kong court to force the company to pay its debts in order to avoid winding-up. Once a winding-up order is issued by the court, the company is declared to be in liquidation.
Evergrande was filed for liquidation, which began in June 2022. At that time, a company actually controlled by Lian Haomin, the son of the "gambling king on the high seas", filed a winding-up petition against Evergrande with the Hong Kong court, firing the "first shot" of overseas creditors to collect debts from Evergrande, involving a debt amount of about 8HK$600 million.
Subsequently, Evergrande repeatedly filed applications for adjournment of the winding-up hearing, and since the filing of the adjournment hearing in June 2022, it has applied for seven applications in the past two years, until today, it was officially liquidated by the Hong Kong court.
This poses a problem. Although China Evergrande is listed in Hong Kong, it mainly operates in the mainland. Are overseas creditors qualified to "grab the cake" in the mainland?
As some may have noticed, just today, the same day that Evergrande was liquidated, a new bill came into effect.
What does this bill mean? To put it bluntly, the two places are mutually recognized, and judgments in civil and commercial cases in Hong Kong must also be enforced in the mainland.
But let's take a lookThe Act clearly states that the bankruptcy liquidation of companies does not apply for the time being. Moreover, a company like Evergrande has a huge scale of thunderstorms, an extremely bad nature, and extremely complex disputes, and it is impossible for the relevant departments to sit idly by.
Therefore, the liquidation of China Evergrande does not mean that the domestic entity of Evergrande Group is bankrupt. When overseas creditors take over the liquidated China Evergrande, the only ones who can operate are China Evergrande and its direct holdings.
Will the guaranteed delivery of the property be affected?
After Evergrande was liquidated, Sean made a commitment as soon as possible, saying that the group would still strive to do everything possible to ensure the stability of domestic business and operation, steadily promote key tasks such as ensuring the delivery of buildings, and maintain the quality of property services. According to industry insiders,Evergrande's housing delivery volume has been close to eighty percent.
Although this is Sean's one-sided statement, as far as the current situation is concerned, the delivery of the building involves the national economy and people's livelihood, even if Evergrande is liquidated, the rights and interests of this piece must be guaranteed, and the impact will not be too great.
Why? First of all, Evergrande's plate is too big and complicated, and the liquidation procedure will not be implemented in three years and five years. This gives sufficient buffer time for the delivery business. The relevant departments can also ask Evergrande to cooperate with the liquidators to communicate, and steadily promote the delivery of the property while cooperating with the liquidation procedures in accordance with the law.
Secondly, take 10,000 steps back and say, even if Evergrande is completely bankrupt, according to the order of bankruptcy and repayment in China, the first priority is to pay off the arrears of employee wages; The second priority is to pay the taxes owed; The third priority is the bankruptcy claim, that is, the creditors of Evergrande.
Among them, the owners who bought Evergrande's unfinished buildings are in the third priority position.
As of the first half of 2023, China Evergrande's total assets are 174 trillion yuan; The contract liability of the homeowner who has paid the money, but has not yet delivered the building, is 600 billion yuan.
In other words, even if you put 174 trillion assets are discounted by 6**, and 1 trillion can also be cashed out. This 1 trillion is more than enough to fully cover the 600 billion of contract liabilities after deducting employee wages and taxes.
Other creditors are not so lucky, such as the bank that lent money to Evergrande, the ** merchant who advanced the payment, etc., are destined to have some money not to get back.
Of course, the worst is the shareholders who bought Evergrande. If Evergrande really goes bankrupt, these people will be the last, and some of the other creditors will eat meat and some will drink soup, and the shareholders will probably not even be able to share the bones.
2.Where does the $4 trillion debt go?
When it comes to liquidation, the issue that everyone is most concerned about is how to divide the cake if Evergrande really falls. As of the first half of 2023, China Evergrande has a debt of 238 trillion, while the assets are only 174 trillion and 640 billion insolvent.
Originally, the assets were not enough for creditors to share, and now Hong Kong is the first to start liquidation, what does it mean?
We began to discuss that in view of the shareholding structure of China Evergrande and the social impact of Evergrande itself, the main business of Evergrande Group in China will not be substantially affected for a period of time.
But Hong Kong's winding-up order is equivalent to opening a Pandora's box.
What does that mean? China Evergrande's assets are divided into two parts, one is onshore assets and the other is offshore assets.
The vast majority of China Evergrande's assets in China are housed in its subsidiary, Evergrande Real Estate Group. According to the financial report of Evergrande Real Estate Group, as of the end of June 2023, the total assets of Evergrande Real Estate Group are 138 trillion yuan, total liabilities 177 trillion yuan, net assets - 386.7 billion yuan.
Among them, the largest and most valuable piece is inventory, with a book of about 1 trillion yuan. Nearly half of the inventory is land reserves, and Evergrande Group's land reserves still have 2100 million square meters.
China Evergrande's overseas assets are relatively empty. According to the previous restructuring plan, the assets of China Evergrande to pay off overseas debts are the notes of Evergrande Group, the first is the portfolio of Evergrande Property, Evergrande Automobile and China Evergrande, mainly equity and other equity assets.
Further down, the overseas properties installed in China Evergrande are only China Evergrande Center in Hong Kong, Junlong Bay in Hong Kong, undeveloped land in Yuen Long, Hong Kong, and the Montebello Castle Hotel project in Canada.
To use a figurative analogy, China Evergrande is equivalent to a big box, after opening this box, there are two boxes inside, of which the big box contains the mainland asset package dominated by Evergrande Real Estate Group, and the small box contains the sporadic assets directly held by China Evergrande.
For overseas creditors, the contents of a small box can be disposed of by them, while a large box can only be traded for equity, but cannot be opened. In other words, the key to the large box is in the hands of mainland creditors.
Therefore, although the liquidated Evergrande has entered the "countdown to death", the formal liquidation has not yet begun. Only when the big box is opened, is the real finale of Evergrande.