***pixabay
On January 29, the High Court of Hong Kong filed a lawsuit against China Evergrande (03333.).HK) to make a winding-up order. Meanwhile, the Hon Justice Ching-fan Chan of the High Court of Hong Kong held a hearing on a potential regulatory order at 2:30 p.m. on the same day.
The information shows that if the company has excessive debts, its creditors and members of the company can file a winding-up petition with the court, and after the winding-up petition is filed, the court will conduct a winding-up petition hearing, and if the winding-up petition is passed, the court will issue a compulsory winding-up order to order the company to sell its assets to pay off its debts, distribute the remaining property, etc.
How much money will China Evergrande's creditors get back?
Restructuring that can't be promoted
China Evergrande's winding-up petition began in 2022. On June 28 of that year, China Evergrande announced that Top Shine Global Limited of Intershore Consult (Samoa) Limited (the Petitioner) filed a winding-up petition against the company with the High Court of the Hong Kong Special Administrative Region on June 24, 2022, involving the company's financial obligations in the amount of 8HK$62.5 billion.
In the announcement, China Evergrande stressed that the company strongly opposes the petition and does not expect the petition to affect the restructuring plan or timetable. The company has been actively communicating with creditors to promote the overseas debt restructuring work, and is expected to announce the preliminary plan for overseas debt restructuring by the end of July.
But China Evergrande's offshore debt restructuring plan came the following yearIt was only officially proposed in March. Evergrande's offshore debt is mainly issued by the company, with a total principal amount of 139US$22.5 billion of U.S. dollar senior secured notes; The aggregate principal amount issued by Jingcheng Priority Corporation and guaranteed by, among other things, Sky-based Holdings*** is 52US$2.6 billion of U.S. dollar senior notes.
In the process of promoting the restructuring plan, China Evergrande has also continuously applied for postponement of the hearing of the winding-up petition, and according to statistics, the hearing of the winding-up petition of China Evergrande has been adjourned 7 times.
However, with Xu Jiayin being taken compulsory measures in September 2023 on suspicion of violating the law and committing crimes, it is difficult for China Evergrande's overseas restructuring plan to be adjusted again - on December 15, 2023, China Evergrande announced that the term of each restructuring support agreement signed on April 3, 2023 has expired and has not been extended. The Company and its advisors will continue to engage in discussions with various stakeholders of the Company with a view to reaching an agreement on the overall restructuring of the Company's offshore debt. But so far there has been no update.
It is worth noting that inIn August 2023, China Evergrande filed documents with the Manhattan Bankruptcy Court in southern New York to file for bankruptcy protection. The main purpose of the document is to explain to the court why Evergrande's current situation qualifies for bankruptcy protection, and it also points out that Evergrande has no significant assets overseas, and the repayment of US dollar debt is mainly carried out through dividends from subsidiaries.
As of June 30, 2023, China Evergrande owned Evergrande Automobile (00708.hk）58.54%, Evergrande Property (06666.).hk）51.71% of the equity, and Evergrande Automobile and Evergrande Property are also difficult to come up with dividends. According to the 2023 interim report, Evergrande Automobile's revenue in the first half of 2023 was 15.5 billion yuan, with a net loss of 6.8 billion$7.3 billion; Evergrande property income 614.5 billion yuan, net profit of 7900 million yuan.
How much can the creditor get back?
Some legal experts said that the liquidation of China Evergrande does not mean that the domestic entity of Evergrande Group is bankrupt. Next, the powers of the current directors of the company are terminated after the receivership of the liquidated entity by a liquidator appointed by the court, but this series of proceedings is generally only for China Evergrande and its directly held assets.
At the same time, Sean, the executive president of Evergrande Group, also said in an interview with a ** that the subject involved in the overseas liquidation order issued by the court is China Evergrande, which is listed in Hong Kong. At present, the management and operation system of Evergrande Group and other domestic and foreign subsidiaries as independent legal entities remain unchanged.
Therefore, after the Hong Kong court issues a winding-up order, Evergrande's offshore creditors may only recover Evergrande's offshore assets. According to the information, according to the relevant regulations of Hong Kong, China on the liquidation of ***, the liquidator will start to distribute assets to creditors after the resolution of shareholders and creditors, and after handling the general expenses (legal fees, litigation costs, Official Receiver's Office and court costs, etc.), the remaining assets will be distributed to limited creditors and general unsecured creditors in order, and finally the assets will be distributed according to shareholders' equity. Employees of a Hong Kong listed company will be treated as preferential creditors of the company and will be entitled to preferential claims for the recovery of unpaid wages, wages in lieu of notice and severance payments from the assets. Generally speaking, after a liquidation, the average rate of all creditors20%-40% (including unsecured and secured creditors), but for overseas creditors the rate is 0-10%.
InIn the restructuring plan launched in March 2023, China Evergrande said that according to the preliminary analysis, the estimate of the company's offshore unsecured creditors** in the group-level liquidation is expected to be 972.8 billion yuan, the estimated ** rate of different groups of creditors is different: the estimated ** rate of overseas unsecured creditors is 353%, 5% of existing Evergrande noteholders92%, and the existing Jingcheng noteholders are 649%-9.34%, 205%。
For the six months ended June 30, 2023, China Evergrande's revenue was 1,2818.1 billion yuan, with a net loss of 39.2 billion4.8 billion yuan. The total liabilities were RMB2,388.2 billion, excluding contractual liabilities of RMB6,039After 800 million yuan, the debt is about 17842RMB200 million, an increase of approximately 678 million compared with the scale of liabilities after excluding contractual liabilities in 2022300 million yuan; Total assets 174399.7 billion yuan, with net assets of about -644.2 billion yuan, a decrease of 45.1 billion yuan from the end of 2022; Its total cash and cash equivalents and restricted cash was only 133800 million yuan.
With increasing liabilities and shrinking net assets, it is less likely that foreign creditors will get their money back.
Not long ago, China Evergrande also disclosed the debt situation of Evergrande Real Estate. As of the end of November 2023, there were 2,053 pending litigation cases with a target amount of more than 30 million yuan in Evergrande Real Estate, with a total target amount of about 4,900$6.9 billion; Involving unliquidated debts due to accumulate 3,1639.1 billion yuan, with a total of 2,055 overdue commercial bills$3.7 billion; During November, 101 new pieces of information were added, and the total amount of new enforcement was about 1304.8 billion yuan.
Although from various point of view, the winding-up order will not affect China Evergrande's business in China, and its guaranteed delivery will continue as usual. However, the pace of delivery is also very slow. In June 2023, China Evergrande issued a quarterly information update announcement, saying that it had delivered about 1220,000 houses. In 2022, China Evergrande delivered a total of 3010,000 houses, while the company's delivery target was 600,000.
Obviously, under the huge debt, it is difficult for Evergrande to quickly complete the delivery target. The former "No. 1 real estate company in the universe" is struggling to survive, and it is difficult to make a comeback.
Author丨Taro.
*丨Exploration Finance (ID: teccj6).
end
Kunpeng Project