A Hong Kong court on Monday ordered the liquidation of the China Evergrande Group, a property developer, as the company's debts ballooned to $300 billion.
Hong Kong Justice Linda Chan ruled to liquidate the embattled property developer after noting that it has been unable to offer a concrete restructuring plan even after months of delays and court hearings.
"The hearing has lasted for one and a half years, and the company still has not been able to bring forward a concrete restructuring proposal," Justice Chan said in her ruling, as quoted by South China Morning Post. "I think it is time for the court to say enough is enough."
It is unclear whether Chinese authorities in Hong Kong would recognize Chan's ruling. It is also unclear if Chinese authorities would let international creditors seize the company's assets following Chan's liquidation order.
Prior to the recent order, Evergrande's shares were trading down as much as 20%. Trading has since been halted in China Evergrande and its subsidiaries China Evergrande New Energy Vehicle Group and Evergrande Property Services.
What Led to China Evergrande's Fall?
Evergrande was once China's largest seller of real estate. However, it defaulted on its $19.2 billion offshore debt in December 2021. Since then, it has spent years trying to convince creditors to back a restructuring plan.
During the negotiation stages, several of the company's executives, including billionaire chairman and founder Hui Ka Yan, were detained on suspicion of crimes, Evergrande revealed in a filing to the Hong Kong Stock Exchange. The company did not elaborate on the nature of the chairman's alleged crimes. However, Fitch Ratings' head of China Properties, Tyran Kam, believes his arrest could be related to the company's wealth management unit, which had been raising funds for its parent firm from individual and corporate investors as part of China's "shadow banking" sector, as reported by CNN.
In addition, The Washington Post noted that Evergrande's struggles may have begun after a shift in the Chinese government's policy in 2020 turned off funding flows to developers who had, for decades, taken out huge loans to rapidly expand their company and used new construction projects to keep borrowing.
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