China Evergrande liquidation hearing unexpectedly adjourned to January

HONG KONG: China Evergrande Group on Monday said it has been granted an adjournment of a court hearing into a liquidation petition to Jan. 29, giving the embattled property developer time to finalise a revamped debt restructuring proposal.

The decision came as the world's most indebted developer with more than $300 billion in liabilities sought adjournment unexpectedly unopposed by the petitioner's lawyer.

On Oct. 29, at the previous adjournment, Hong Kong High Court Justice Linda Chan said Monday's hearing would be the last before a decision was made whether to liquidate Evergrande in the absence of a "concrete" restructuring plan.

After Monday's adjournment, Evergrande stock reversed losses from earlier in the day to jump more than 13%.

Evergrande defaulted on offshore debt in late 2021, becoming the poster child of a debt crisis that has engulfed China's property sector. Last week it scrambled to revise its restructuring plan to avoid liquidation, Reuters has reported.

Evergrande "somewhat surprisingly has obtained some further time to rethink its plans," said partner Neil McDonald of Kirkland & Ellis, a legal adviser to a key group of offshore creditors opposed to the revised terms. However, the firm is likely to be wound up at the next hearing if it does not come up with a plan accepted by all classes of creditors, he said.

SURPRISE

Hong Kong-based investment firm Top Shine filed the petition in June 2022 saying Evergrande had not honoured an agreement to repurchase shares it bought in Evergrande unit Fangchebao.

The petitioner surprised the court on Monday when its lawyer started proceedings saying he was "instructed not to present any argument in opposition to" adjournment.

Justice Chan ordered the petitioner inform other creditors a week ahead of the next hearing should it decide to withdraw the petition, so the other creditors can fill in if they wish.

"We'll see what happens with the company before the 29th but if nothing changes, then yes," said Kirkland's McDonald when asked by reporters whether the creditors Kirkland represents will file to liquidate Evergrande if the petitioner withdraws.

Evergrande's lawyer told the court the developer expects to "refine" its restructuring proposal in the next five weeks.

Justice Chan said Evergrande must hold direct discussion with "relevant authorities" on the new terms, and that the plan needs support from all classes of creditors by the next hearing.

Evergrande had failed to get the 75% approval required from so-called Class C creditors for original terms proposed in March, sources previously told Reuters.

Managing Director Bert Grisel of investment bank Moelis & Co - advising the same group of creditors - said the group "firmly" rejects the revised plan in its current form because it would be worse than what they would be entitled to in a liquidation.

"Liquidation does little good to creditors, but it is extremely difficult to get a debt repayment plan that satisfies everyone - that is why we have a deadlock with Evergrande here," said credit analyst Ting Meng at ANZ Bank China.

UNFINISHED HOMES

Liquidation of Evergrande, which listed $240 billion in assets as at June-end, would increase pressure on the already reeling property sector, which accounts for a quarter of the world's second-largest economy.

Its debt woes have been a major concern for global investors at a time when the economy has struggled for a strong post-pandemic recovery, with property sales slowing and hundreds of thousands of homes left unfinished.

Authorities have announced a string of measures to revive the sector, destabilised in the last few years by the debt woes Evergrande and other giants such as Country Garden.

Evergrande has been working on a debt revamp plan for almost two years. Its original plan was thrown off course in late September when it said its billionaire founder Hui Ka Yan was under investigation for suspected criminal activity.

At the time, the developer also said it failed to win regulatory approval to issue new U.S. dollar bonds - a crucial part of the restructuring plan - as its flagship onshore unit was also under investigation. - Reuters