Once China’s most prolific property developer, China Evergrande has narrowly averted liquidation.
A Hong Kong bankruptcy judge on Monday gave Evergrande another two months to work out a deal with foreign investors who lost money when the company defaulted two years ago with hundreds of billions of dollars in debt. The judge set another court hearing for Jan. 29.
It was an unexpected development in a bankruptcy lawsuit filed 18 months ago by one investor trying to get paid by forcing the dismantling of Evergrande. The judge, Linda Chan, had said in October that she was ready to order the liquidation of Evergrande if it could not reach an agreement with its creditors on how to divide what remains of the company’s assets.
“We thought the company was going to be wound up today,” said Neil McDonald, a partner at the law firm Kirkland & Ellis, which is a legal adviser to the creditors. The investor who originally filed the suit, he said, “changed its position and didn’t push to wind up the company, which was a surprise to us.”
For two decades, Evergrande was a model of China’s embrace of capitalism. It was one of the country’s most successful companies and at the heart of the real estate industry, which drove one third of the nation’s economic growth. But years of overexpansion left it financially precarious, and when it defaulted, it had more than $300 billion of overdue bills.
Evergrande’s default plunged China’s housing market into crisis, leaving many Chinese households despondent about the property market, the main store of wealth for most families. As Evergrande’s financial position has gotten progressively worse in recent months, investors have come to expect little back.
This is a developing story and will be updated.
