China Evergrande's liquidation process has entered a new stage.
On May 2, China Evergrande released further information regarding the liquidation. The High Court of Hong Kong made a key ruling on April 17 regarding the liquidation process of China Evergrande Group, stating that only statutory creditors may participate or become members of the liquidation supervision body, excluding economic interest holders. The court also supported the liquidators in excluding shareholders from decision-making, and Evergrande's stock will remain suspended.
It is reported that this ruling means that Evergrande's liquidation has entered a substantive phase, but uncertainties remain regarding cross-border asset disposal, creditor negotiations, and asset recovery.
Core of the ruling: statutory creditors lead, shareholders are completely excluded.
Since the Hong Kong High Court issued a liquidation order for Evergrande on January 29, 2024, officially entering the liquidation process, its liquidation progress has been closely monitored.
On March 10 this year, China Evergrande announced that at the postponed hearing held on February 27, the court, after hearing statements from representatives of the liquidators, the director of the bankruptcy management office, and a final holder, postponed the judgment and will make a ruling later. The court's ruling will be announced at an appropriate time.
On May 2, China Evergrande released further news that on April 17, the court made a ruling and provided instructions regarding the application. Further details about the court's ruling will be published on the website.
According to a report by China Securities Journal, the ruling by Judge Chan Linda of the High Court of Hong Kong clearly restricts COI membership in the Evergrande liquidation process to 'creditors holding statutory debts,' directly denying the participation rights of 'ultimate holders' (i.e., investors holding economic interests through global bonds). The court emphasized that the liquidation process must be based on legal rights rather than economic interests to avoid 'procedural chaos and abuse of power risks.'
Meanwhile, due to Evergrande's insolvency, shareholders are excluded from participating in COI membership as they have no remaining asset distribution rights. The court specifically pointed out that the controlling shareholder may be involved in 'historical misconduct' and must be prevented from interfering with the liquidation.
In addition, the court requires the liquidators to make public announcements through multiple channels, including the Hong Kong Stock Exchange, the Singapore Exchange, and mainstream media, to broadly solicit creditor intentions and submit the COI composition plan to the court within 42 days.
Debt restructuring still faces challenges.
Industry analysts believe that although the court's liquidation order provides a framework for debt restructuring, Evergrande's debt restructuring still faces enormous challenges. Currently, Evergrande has not proposed a feasible restructuring plan, and its subsidiaries, such as Tianji Holdings, have also entered liquidation procedures, further complicating the overall debt resolution.
Looking back, Evergrande's debt crisis has been continuously exposed since the second half of 2021.
As of June 30, 2023, China Evergrande's total liabilities reached 2.39 trillion yuan, while total assets were only 1.74 trillion yuan, highlighting Evergrande's severe financial predicament. The accumulation of massive debt has not only severely constrained Evergrande's daily operations but has also left numerous creditors in distress.
On January 29, 2024, Evergrande was officially ordered to be liquidated by the court. Edward Simon Middleton of Anma Consulting Ltd. and Huang Yongshi were appointed as joint and individual liquidators for China Evergrande.
It is reported that the main tasks of the liquidators include preserving company assets, returning value to creditors and other holders, and investigating the reasons for the company's liquidation. Meanwhile, the relevant liquidators are also seeking appropriate restructuring plans.
Previously, China Evergrande stated in its quarterly update that although the liquidators have recovered a small amount of value from the company's assets, the company's liquidity and other internal resources remain limited. Given the company's debt levels and the challenges facing group operations, the liquidators have yet to find a restructuring plan that would enable the company to meet resumption guidelines and resume trading of its shares under the absence of significant new investments.
In December last year, it was reported that Evergrande's liquidator Anma Consulting Ltd. had taken over offshore entities owned by Xu Jiayin that held private jets and was listing the aircraft for sale. The aircraft is 14 years old, an Airbus A319 model, comparable in size to a commercial passenger aircraft, and was once a symbol of Xu Jiayin's wealth during Evergrande's peak.
According to reports, after the lifting of the litigation confidentiality order, Evergrande disclosed that multiple overseas luxury properties, private jets, luxury cars, and yachts owned by Xu Jiayin and his ex-wife Ding Yumei have been frozen by the court. Court documents show that in addition to the Airbus A319, Xu Jiayin also has at least one Airbus A330, a Gulfstream G450 private jet, two yachts, and two Rolls-Royce Phantom series vehicles frozen.
In January of this year, China Evergrande Group and Xu Jiayin were restricted from high consumption, with the executing court being the Guangzhou Intermediate People's Court. The case arose because, in March 2023, China Evergrande Group and Guangzhou Kailong Real Estate Co., Ltd. were subject to forced execution of over 6.054 billion yuan.