21st Century Business Herald reporter Cheng Xuerong reported from Guangzhou
On the morning of January 29, 2024, the High Court of Hong Kong held a hearing on the liquidation of China Evergrande, at which the judge ruled on the liquidation of China Evergrande, and a hearing on whether to issue a regulatory order will be held on the afternoon of the 29th, and the court may appoint liquidators by issuing a regulatory order after the hearing. On June 24, 2022, Jiasheng Global filed a winding-up petition against China Evergrande in the High Court of Hong Kong, involving a debt amount of 8HK$62.5 billion.
After seven adjournment hearings, and subsequent rumors that new foreign creditors had joined and intended to take over, China Evergrande finally ushered in the fate of being ordered to liquidate. Fortunately, Evergrande's housing delivery volume has been close to eighty. Why did China Evergrande get to such a point? What does this result mean for Evergrande Group? Will its domestic business, especially the follow-up work of guaranteeing the delivery of the property, be affected?
In this regard, Sean, CEO of Evergrande Group, gave an exclusive response to the reporter of the 21st Century Business Herald, and many experts also interpreted it from different angles.
Sean: It's a pity! We will steadily promote key tasks such as ensuring the delivery of buildings
21st Century Business Herald: What impact will the court of hearing on the liquidation of Evergrande Group? What's next for Evergrande Group?
Sean:The Group and China Evergrande have made every effort to defend against the offshore winding-up petition. Previously, the Group supported and urged China Evergrande and its advisory team to continue to conduct comprehensive and in-depth exchanges with various creditors, adhere to the principles of marketization, rule of law and internationalization to treat domestic and foreign creditors fairly, actively promote overseas debt restructuring, and protect the best interests of domestic and foreign creditors to the greatest extent and fairly based on the actual situation of the company.
Although we have been working hard to restore and enhance the value of our assets and business vitality, we have made a number of major adjustments to the core terms of some restructurings, not only to protect the interests of overseas creditors, but also to ensure the time and space for the company's continuous operation and risk mitigation, and have also received the full understanding and valuable support of a large number of creditors.
However, objectively, the group's operation is facing huge difficulties, resources are extremely limited, and the preliminary voting of creditors has not met 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 due to suspected violations and crimes, and the company also believes that it cannot meet the relevant statutory conditions for the key links of overseas debt restructuring, which makes all kinds of uncertainties continue to intensify, so that the debt restructuring plan is finally difficult to land. Today's decision by the Court is contrary to our original intentions, and we can only express that we have done our best and regret it.
In the future, the Group will face up to difficulties and problems, take all legal and compliance measures, steadily promote the normal operation of the Group's business on the premise of protecting the legitimate rights and interests of domestic and foreign creditors, and 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.
I would like to emphasize that the subject of the overseas winding-up order issued by the court this time is China Evergrande (03333.), which is listed in Hong Konghk）。At present, the management and operation system of Evergrande Group and other domestic and foreign subsidiaries as independent legal entities remain unchanged, and the Group will continue to do everything possible to ensure the stability of domestic business and operation, steadily promote key tasks such as ensuring the delivery of buildings, maintain the quality of property services without being affected, and will still make every effort to ensure the smooth progress of risk resolution and asset disposal, and will still do its best to promote various tasks fairly in accordance with the law.
Finally, I would like to take this opportunity to once again express my heartfelt thanks to all parties who have given Evergrande Group their trust and support in the process of stabilizing operations, resolving risks, and defending liquidation since the outbreak of the company's debt crisis. For the follow-up situation, please refer to the company's announcement.
"It conforms to market logic and will not substantially affect domestic business operations, and there is little basis for restructuring in the event of liquidation".
For such a result, a senior partner of a well-known accounting firm in Hong Kong who is familiar with cross-border restructuring told the 21st Century Business Herald reporter that Evergrande Group, as a super-large real estate enterprise with diversified business sectors, although its overseas debts account for a small proportion of the overall debt, the structure is complex and the absolute amount is large. The background is faced in the group 2The huge pressure of 39 trillion debts, the continuous negative news, the continuous accumulation of operating pressure, and the company's announcement that it does not comply with the regulations on overseas issuance, etc., this ruling is reasonable and realistic.
The above-mentioned senior partners believe that from the market cases over the years, there is no direct causal relationship between the liquidation of China Evergrande and the size of the company and the complexity of the debt, and the key reason should be that the company has been exposed since the debt crisis, and has been exposed to major financial and management problems such as illegal occupation of funds and illegal guarantees. Liu Yongzhuo and the management personnel of Evergrande Wealth Management Company were executed for criminal coercive measures on suspicion of violating the law and committing crimes, which directly confirms that the internal management of Evergrande Group has been chaotic and out of control for a long time and even violates the law.
In the view of this senior partner, from the occurrence of the Evergrande debt crisis to the deterioration, after several rounds of market adjustments, the overseas bond market** of Evergrande Group, which originally had a face value of US$100, has fallen to 1Around $5, the share prices of Evergrande's three Hong Kong-listed companies have fallen to 0Below HK$5. This is an objective process in which the market expects the crisis and uncertainty of Evergrande from being expected to gradually accepting, and then digesting and reflecting it on bonds and enterprises. Various market sentiments have led to a certain proportion of creditors supporting and not supporting the restructuring, forming a deadlock situation, which further forms pressure and even resistance on different aspects of offshore debt restructuring.
He further analyzed that based on the above-mentioned market information, including the expected judgment released by overseas creditors, the market's confidence in China Evergrande, an overseas entity, is not much left, and it can be speculated that in the case of subsequent liquidation, there is almost no basis for China Evergrande's restructuring.
Judging from the development of China Evergrande's main business, since the listed company is a separate legal entity, i.e., a "separate legal entity", and judging from the usual working mode of liquidators in the Hong Kong market, it is estimated that Evergrande Group's domestic business will not be greatly affected immediately, but it is expected that the subsequent liquidation work will be complex, arduous and protracted.
In accordance with the relevant legal provisions and subsequent procedures, a provisional liquidator or liquidator appointed by the court will take over the listed company. The primary duty of a liquidator is to preserve and realise the assets of the company in the event of liquidation, and will require the company to cooperate in the investigation of assets, liabilities and operations in accordance with market practice, and to analyze various possibilities for dealing with assets and liabilities. The relevant regulations and laws in the Hong Kong market are relatively mature, and it is believed that the liquidator should take into account the whole situation and protect the interests of creditors and all relevant parties as far as possible through active communication and negotiation with the cooperation of the company.
"Domestic home buyers enjoy priority rights in accordance with the law".
A legal expert familiar with the situation told the 21st Century Business Herald reporter that the significance of the winding-up order issued by the Hong Kong court in terms of legal procedures and the impact on the market psychology is far greater than the actual impact on Evergrande Group's domestic business and risk resolution. There are two main reasons for this:
On the one hand, this overseas winding-up order is only aimed at China Evergrande (03333.).HK), one of the entities of Evergrande Group's listed companies in Hong Kong. Legally speaking, liquidation is a legal procedure in which the assets held by the company are realized, and the assets are distributed according to the priority of the creditor's rights and the debts of the company are repaid.
However, it must be noted 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.
On the other hand, home buyers have statutory priority rights in accordance with the law. According to the judicial interpretation issued by the Supreme People's Court in April last year, under the corresponding conditions, the consumer of commercial housing claims that his right to claim for the delivery of the house and the right to claim the return of the price have priority over other creditor's rights to be repaid, that is to say, there is a solid legal basis for the buyer to have priority rights in risk resolution and debt repayment.
As one of the overseas listed entities of Evergrande Group, China Evergrande and its domestic and foreign subsidiaries are independent legal persons. From the perspective of equity structure, even if the overseas entity is liquidated, for a period of time, Evergrande Group's main business in China will not be substantially affected, and pragmatically speaking, the impact of the liquidation on the domestic delivery of buildings will be very limited.
In addition, after the winding-up order is issued, the company's litigation proceedings in Hong Kong are suspended, which can also avoid the litigation initiated by some other overseas creditors and the outcome of which will affect the debt risk resolution of the entire Evergrande Group.
Generally speaking, as long as the resolution of debt risks is promoted in accordance with laws and regulations, there is a legal guarantee for the delivery of the building, which is the saying "the sky can't fall". The court's ruling means that China Evergrande has been liquidated due to its long-term shortcomings and may eventually lead to the dissolution of the offshore company, despite its previous efforts to defend itself and promote debt restructuring. Although there are still cases in history that companies can seek to set aside the winding-up order by re-initiating debt restructuring proceedings under the leadership of liquidators, there is a high probability that only a theoretical possibility is left for China Evergrande.
"The moment is not the moment".
The person in charge of a well-known brokerage institution told the 21st Century Business Herald reporter that it is still necessary to see the market game and the choice of institutions from the results of liquidation.
First of all, regardless of the motive outcome, it is the legitimate right of creditors to file and replace a winding-up petition and an important means for creditors to protect their own interests in the international market. However, it is worth noting that both are liquidations and market behaviors, and the liquidation at this time is very different from the liquidation at that time.
At that time, the winding-up petition filed by Jiasheng Global, which was actually controlled by Lian Haomin, the son of the rumored "gambling king on the high seas", was more regarded by the market as an "extraordinary behavior" of using all means to avoid liability for its own investment decision-making mistakes, putting maximum pressure on Evergrande Group, and even trying to "swallow elephants" with a very small proportion of creditor's rights.
The fact that the High Court of Hong Kong ordered the liquidation after the overseas creditors expressed their intention to take over the liquidation was the result of a game between all parties in the market after all kinds of important information were gradually and truthfully disclosed, almost the entire offshore debt restructuring cycle was completed, and the creditors negotiated and communicated with each creditor for many times.
Secondly, most of Evergrande's domestic and foreign creditors are professional institutions, and the timing and timing of different institutions holding claims and bonds are different. But whether it is a knife licking blood or an investment failure, they will only make corresponding choices based on their own interests.
The person in charge of the above-mentioned well-known brokerage institution speculated that different institutions will hold different positions at different times after Evergrande's accident, for example, some overseas creditors will turn to support liquidation at some point after the restructuring is blocked due to the company's violations of laws and regulations. The independent decision-making of different institutions can easily form a very complex market reaction, and it is estimated that there will be different positions and reactions in the liquidation process.
This time it is tantamount to the fact that the overseas creditors who originally opposed Lian Haomin's liquidation have changed their positions and expressed their willingness to replace Lian Haomin with an attitude of drawing wages from the bottom of the kettle, and may have contributed to the 'kick in the door' of the judge's order for liquidation, which means that the creditors have judged that they are indeed unable to obtain more residual benefits from China Evergrande under the conditions of market-oriented restructuring. ”
Finally, although Evergrande's objective fundamentals have basically not changed substantially since the accident, the market's current perception of Evergrande Group is also completely different from the perception when it first took out the risk.
Evergrande Group has reluctantly disclosed a series of shocking negative information under the pressure of the market, which is conducive to the market to fully understand the operation of the enterprise, but it focuses on the internal management chaos of the enterprise, the questionable accounting operation and the false promise of "saying one thing and doing another". It still makes the trust of the enterprise management team greatly reduced.
In addition, Du and others of Evergrande Wealth, Xu Jiayin, the actual controller of Evergrande Group, and Liu Yongzhuo, the person in charge of Evergrande Automobile, have also been taken compulsory measures.
"Fair, ordinary and courteous treatment of China Evergrande liquidation".
A capital market observer pointed out to the 21st Century Business Herald reporter that there are some erroneous views on the current market, confusing Evergrande's long-term financial fraud and other violations of laws and regulations and even crimes caused by the accumulation of risks into a common problem of real estate enterprises, and even trying to distort Evergrande's risk into not supporting the bailout of private enterprises. These erroneous views are clearly flawed in both the arguments and the arguments.
The above-mentioned observers believe that the market and state-owned enterprises should be treated equally, and on the basis of caring for the development of enterprises and maintaining fault-tolerant innovation space, the "good boys" who abide by the law and the "bad boys" who violate laws and regulations or even commit crimes should be distinguished. Our country's support and encouragement of the development of private enterprises is to prevent the situation in which bad money drives out good money in a timely manner, and to maintain a good business environment, we must not let the situation of "bad children" developing savagely and bullying "good children" go unchecked.
In the view of the market observer, Evergrande's problem is a "bad boy" problem, which means that we should look at the company's suspected violations of laws and regulations and the liquidation of Evergrande Group's overseas entities with fairness, normalcy and objectivity.
On the one hand, those who have stepped on the red line of the law and challenged the bottom line of legal fairness and justice, whether the company's business is thriving or liquidated and bankrupt, there are no exceptions, let alone "too big to fail". For China Evergrande, even if some creditors are willing to take risks to promote the success of the restructuring, I am afraid that it will not be the "gold medal for avoiding death" for this company to escape domestic and foreign legal responsibilities, and it will also be held accountable in accordance with the law.
On the other hand, the liquidation of the overseas listed entities ordered by the Hong Kong court this time is one of the overseas listed entities, and the liquidation in the relatively mature Hong Kong market is generally one of the inevitable results of Evergrande Group's long-term large-scale expansion, accumulation of risks and even violations of laws and regulations, which is in line with market practice and is also expected.
In addition, Evergrande Group's main business is in the country, according to the current information comprehensively, involving Evergrande's delivery of the project to promote the overall progress is stable, according to familiar with the situation of industry insiders, Evergrande housing delivery volume has been close to eighty, individual projects may have some difficulties, but I believe that under the promotion of all parties, the housing delivery problem can finally be properly solved.
The market observer said that Evergrande's problems are indeed serious, but the market should not be overly anxious. On November 27, 2023, the eight national departments jointly issued 25 measures to support the private economy, which strongly reflects that we are continuously increasing our support for the private economy at the concept, system and implementation level. At the same time, the judicial organs, regulatory departments, and the market are also constantly improving the punishment mechanism for enterprises and individuals who undermine the fairness and justice of the market, violate laws and regulations, and even commit crimes, so as to maintain a good environment for the development and growth of the private economy.
On October 10 last year, the Supreme People's Court issued the "Guiding Opinions on Optimizing the Legal Environment and Promoting the Development and Growth of the Private Economy", which clearly emphasized the need to regulate the behavior of shareholders, pointing out that it is necessary to investigate the legal responsibility of the controlling shareholders and actual controllers for abusing their dominant positions such as "hollowing out" the enterprise through related party transactions, occupying enterprise funds for non-business purposes, and transferring risks to the enterprise in violation of guarantees, so as to increase the cost of "insider control" for violations and crimes. Maintain a modern enterprise management system that separates shareholder ownership from enterprise management rights.
He further pointed out that there has been new progress in the occupation of 13.4 billion yuan of Evergrande property funds that have attracted attention from all walks of life, and the relevant entities of Evergrande property have filed lawsuits against China Evergrande, Evergrande Real Estate and other entities involved In other circumstances, I am afraid it is difficult to convince the court, the regulatory authorities and the market that Xu Jiayin, as the actual controller of the major shareholder, does not have to bear responsibility for this huge amount of capital embezzlement.
In an interview with the reporter of the 21st Century Business Herald, a well-known real estate market institution said that from a macro point of view, the main expected goals of economic development in 2023 have been successfully achieved, and the trend is gradually improving. According to data and interpretation from the National Bureau of Statistics, GDP growth in 2023 will be 52%, the economic data mainly reflects the grain production, animal husbandry, industry, service industry, market sales and other ten aspects of positive signals, although real estate development investment, commercial housing sales area and sales have declined to varying degrees, but the annual national fixed asset investment scale is increasing, an increase of 3 percentage points.
At the same time, the central bank has recently spoken intensively, not only to focus on maintaining the steady operation of the financial market, and steadily resolve the risk of bond default of large real estate enterprises, but also to increase financial support for guaranteed delivery of real estate in accordance with the principle of city-specific policies, maintain stable real estate financing, and make good use of policy tools such as the loan support plan for guaranteed delivery and the rental housing loan support plan.
The person in charge of the real estate market agency pointed out that the Ministry of Housing and Urban-Rural Development revealed in a previous CCTV interview that the work of guaranteeing the delivery of buildings in various places is steadily advancing with the support of all parties, which has led to a positive year-on-year growth in the area of housing completions across the country, reaching 20%. After a series of policies such as "recognising housing but not recognising loans" were implemented in the early stage, a number of self-occupation needs were released, and they continued to be effectively released, and the effect was still relatively obvious, and there was also regional differentiation.
Judging from the rebound of some key cities in the second half of last year, this phenomenon is conducive to the recovery of the property market in first-tier and hot cities, and the two forces of policy and market are strengthening and promoting each other in the general direction of stabilizing and rebounding, and the macroeconomic recovery is improving, which has played a key role in the stabilization of the entire real estate industry, and has also proved that it is effective to help enterprises bail out, and further stabilize the confidence of the industry and the entire market.
On January 26, the Ministry of Housing and Urban-Rural Development held a meeting to emphasize that it will accelerate the implementation of the urban real estate financing coordination mechanism, support the development and construction of real estate projects, and meet the reasonable financing needs of real estate enterprises under different ownership systems without discrimination. At the same time, from the perspective of the goal of maintaining the healthy and steady development of the entire real estate market, there may be some "labor pains" in the short term, but it is indeed beneficial in the long run. Only by clearing out the risks caused by problematic enterprises with major hidden dangers and serious violations of laws and regulations can we leave a broader and healthier space for the survival and development of other law-abiding, compliant and healthy enterprises.
In the view of the person in charge of the real estate market agency, Evergrande's situation is very special, this company is like the "footless bird of paradise" in the famous line of the movie "The True Story of A Fei": there is a company in the world that has no principles, and can only keep looking for the outlet to "blow" the bubble, and if it can't blow, it will find the next outlet to continue to "blow".
For a long time, the society's attention and discussion on the "guest history summary" that reflects the extravagant life of Xu Jiayin and Evergrande executives, the "technical divorce" between Xu Jiayin and Ding Yumei, the inflated income of Evergrande Group by 664.3 billion yuan, and even the wrong interpretation of the so-called "Evergrande debt dollarization" and other concepts all point to the anxiety, doubts and questions of the market and the facts and problems such as Evergrande Group's huge debts and violations of laws and regulations. However, for a period of time, the market and the first company have also observed that Evergrande Group does not cherish the opportunity to save itself, but seems to be accelerating the "lying flat", and small actions are continuous, continuing to "bet on the track" with a fluke mentality, and the "water army" of Evergrande Group on various social networks is also frequently dispatched.
Although the overseas debt with a scale of 30 billion US dollars and an extremely complex structure accounts for less than one-tenth of the total debt of Evergrande Group, it can still move forward with such a long time under the condition that the fundamentals are so fragile, the game between all parties is so fierce, the funds are exhausted to this point, and the outside world has so many questions. Now Evergrande Life Insurance and Shengjing Bank have been "de-Evergrande", Evergrande and other three ** under the Evergrande Department have all "become immortals", overseas war investment is also full of uncertainty, and Xu Jiayin and others have been taken compulsory measures for illegal crimes, this "footless bird of paradise" may inevitably usher in the end of grounding and falling to the ground.
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