China Evergrande Group, the world’s most indebted developer, has received an adjournment of a court hearing regarding a liquidation petition until Jan. 29. This decision grants the company more time to finalize a debt restructuring proposal. The grant of adjournment was unopposed by the petitioner’s lawyer and resulted in a significant uptick in Evergrande’s stock, with a jump of more than 13% following the announcement.
With over $300 billion in liabilities, Evergrande defaulted on its offshore debt in late 2021. Since then, the company has been scrambling to revise its restructuring plan in a bid to avoid liquidation. The surprising adjournment provides Evergrande with additional time to reconsider its plans. However, if the company fails to come up with an accepted plan by all creditors at the next hearing, it is likely to face winding up.
Investment firm Top Shine, the petitioner, did not present any argument against the adjournment. Nevertheless, the court ordered the petitioner to inform other creditors one week before the next hearing if it decides to withdraw the petition. Evergrande’s lawyer expressed confidence that the company will refine its restructuring proposal within the next five weeks. The success of the plan hinges on securing support from all classes of creditors.
The potential liquidation of Evergrande would exert further pressure on China’s already struggling property sector, which constitutes a quarter of the country’s economy. The company’s debt troubles have been a source of concern for global investors. Evergrande has been diligently working on a debt revamp plan for almost two years.
However, the original plan faced disruptions when the company’s billionaire founder, Hui Ka Yan, became the subject of an investigation for suspected criminal activity. Additionally, Evergrande failed to obtain regulatory approval for issuing new U.S. dollar bonds, further complicating its debt restructuring efforts.
As the court grants Evergrande an adjournment, all eyes will be on the company’s next moves. The outcome will not only determine the future of the embattled developer but also have far-reaching implications for China’s property market and global investors.
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