On the morning of January 29, 2024, the gallery of Court No. 29 on the 12th floor of the High Court of Hong Kong was full. Judge Chen Jingfen"Final word", ordering China Evergrande to liquidate.
01 What does a winding-up order mean?
In her judgment, Chen Jingfen stressed that it is not uncommon for a company to propose and implement a restructuring plan after being wound up by the court; In the case of Evergrande, another benefit of liquidation is that it frees the company from the control of Xu Jiayin, who is one of the regulatory obstacles preventing Evergrande from issuing new debt instruments or new shares after Xu Jiayin's involvement.
Under the laws of the HKSAR, upon the issuance of a winding-up order, the powers of the original directors of the company cease to perform duties such as keeping and maintaining books and records, preparing and filing statements of affairs, etc.; A company that has been made a winding-up order may also appeal against the court's decision, but this will not prevent the winding-up proceedings from proceeding.
In response to the overseas liquidation order, Sean, executive director of China Evergrande, pointed out in an interview with ** on January 29 that the company will face difficulties and take all legal and compliance measures to promote the normal operation of the business on the premise of protecting the legitimate rights and interests of domestic and foreign creditors; At the same time, it will also actively communicate with the liquidators, cooperate with the liquidators to perform relevant procedures in accordance with the law, and promote debt resolution in accordance with international practices and market rules.
02 Some of the concerns after the winding-up order was issued.
Concern 1: This Evergrande liquidation may open a window for overseas liquidators?
Some market participants believe that the liquidation of Evergrande may open a window for overseas liquidators to assert their domestic economic rights and interests on behalf of domestic creditors.
At the institutional level, Hong Kong, as an international financial institution, can further strengthen its traditional rule of law advantages, which will help enhance Hong Kong's role as a hub for Chinese mainland's outward direct investment and foreign direct investment in the mainland.
Concern 2: After China Evergrande is liquidated overseas, what is the impact on the domestic "guaranteed delivery of buildings"?
"Guaranteed delivery of buildings" is undoubtedly the focus of China Evergrande and the entire Evergrande Group in China, and the impact of China Evergrande's overseas liquidation on domestic "guaranteed delivery of buildings" is also one of the major concerns.
Liquidator Wong Sze Wing said that the winding-up order is only aimed at China Evergrande, the subject of liquidation, and will not have a direct impact on the operation of its subsidiaries, especially those operating in Chinese mainland, which will not be affected by the winding-up order.
In addition, the Reply of the Supreme People's Court on the Protection of the Rights of Consumers of Commercial Housing, promulgated and implemented in April 2023, has long made it clear that buyers of commercial housing have super priority in the ranking of creditors, so Evergrande's overseas liquidation order will not have an actual impact on the "guaranteed delivery of buildings".
Concern 3: Overseas creditors want to get a share of domestic assets in the game?!
Evergrande, a huge collection of onshore and offshore companies, accounts for 90% of China's domestic assets, and the vast majority of the funds invested by overseas creditors were used for onshore projects. The offshore assets mainly include the shares of related companies Evergrande Property and Evergrande Automobile, the shares of Tianji Holdings, which is registered in Hong Kong, China Evergrande Center, a commercial property in Wan Chai, Hong Kong, a small number of real estate and residential projects in remote areas of Hong Kong, as well as loans and some investments.
The money that foreign creditors can really recover from the liquidation comes mainly from the offshore assets owned by China Evergrande.
In the case of the company's serious insolvency and the heavy responsibility of "guaranteeing the delivery of the property", in this cross-border liquidation of China Evergrande, the overseas creditors may indeed want to claim compensation from the domestic assets in China through a winding-up order, the probability is very low, and it will be difficult to share the rights and interests of the domestic assets.
Write at the end. Seeing that the Hong Kong court really will'Do what you do'The issuance of a winding-up order, China Evergrande's eventual liquidation and bankruptcy, is a kind of pressure for other insuring real estate companies. An institutional bond investor who asked not to be named said.