Linda Shan, president of a Hong Kong court, whistled on Monday January 29 the end of a protracted economic and legal drama by ordering the liquidation of Evergrande, the most indebted Chinese developer in the world. The decision paves the way for the sale of remaining assets to try to recover part of what the company owes. Foreign investors hold $23 billion (21 billion euros) of Evergrande’s debt, but its total claims amount to 2.388 billion yuan (302 billion euros), the majority of which is owed. to small Chinese banks and unpaid subcontractors. The stock fell 21% on the Hong Kong Stock Exchange on Monday morning, before being suspended by the financial center.
The procedure, in progress for a year and a half, had been postponed several times after announcements of last-ditch negotiations. Monday morning, the magistrate in charge of the case summed up the feelings of many creditors in delivering her verdict: “The hearing has been going on for a year and a half, and the company has still not been able to present a concrete restructuring plan. I think it’s time for the court to say enough is enough. »
As a symbol, the court appointed the law and consulting firm Alvarez & Marsal (A&M) as liquidator: it is the same company that had managed the liquidation of Lehman Brothers, whose bankruptcy had precipitated the financial crisis of 2008. The Deloitte firm estimates that only 3.4% of the group’s debt could be recovered in the event of liquidation.
The revelation of the catastrophic situation of Evergrande in 2021 lifted the veil on the fragility of the Chinese real estate sector. At the time, investors expected a rescue of the giant, but Beijing preferred to let the group sink into crisis and make it a symbol of the risks linked to over-indebtedness. In September 2023, Evergrande founder Xu Jiayin was placed under house arrest, “due to suspicion of a crime or offense in violation of the law”the company indicated.
Sharp decline in stock markets
Over the past two years, more than 80 developers have defaulted on their debt, thousands of projects have been suspended, provoking protests from aggrieved owners across the country. In August 2023, the payment default of Country Garden, a private developer nevertheless considered financially solid, showed that no one escaped the storm. In recent months, Beijing and local governments have increased measures favorable to the sector, without managing to reverse the trend.
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