Chinese property giant Evergrande group has been ordered to liquidate by a court in Hong Kong, in a sign that time is running out for the world's most indebted real estate group, with over $300 bn (€278 bn) of liabilities.
The ruling came after Evergrande repeatedly failed to draw up plans to restructure its debts.
"It is time for the court to say enough is enough," commented Judge Linda Chan, appointing Alvarez & Marsal as the liquidator for its assets.
However, as the firm's Hong Kong arm is independent from its China operations, the firm can continue to trade on the mainland, Evergrande's executive director, Shawn Siu, confirmed.
Tiffany Wong, managing director of Alvarez & Marsal, said: 'Our priority is to see as much of the business as possible retained, restructured, and remain operational. We will pursue a structured approach to preserve and return value to the creditors and other stakeholders.'
Judge Chan said that the appointment of a liquidator was in the company's best interest, particularly since Evergrande chairman Hui Ka Yan is under investigation for alleged criminal activity.
While the liquidation team was bound for Evergrande's Shenzhen headquarters on Monday, experts suggested that Chinese courts may not recognise the Hong Kong ruling.
Most of the money Evergrande owes is to lenders in mainland China, who have limited options for legal recourse.
Evergrande's financial woes first crystalised in 2021 when it defaulted on its debt.
In August 2023 it filed for US bankruptcy protection to shield itself from creditors, but as losses deepened around the world, management probes by the Chinese police complicated hopes of a swift resolution.
After numerous delays over the debt restructuring, Evergrande requested another three month extension last Friday in Hong Kong, which was denied by Judge Chan.
The ruling marks the latest piece of bad news for the Chinese property sector. Against the backdrop of a sluggish economy with deflationary pressures now likely to persist through mid 2024, real estate - which makes up nearly a quarter of China's economy - has been one of the hardest hit business segments.
Chinese developer Country Garden has repeatedly missed debt payments and defaulted on billions of offshore bonds last October. The firm announced it would auction half a billion dollars of assets in Guangzhou two weeks ago, as it blamed the pressures of the liquidity crunch amid the country's frail property market.
Analysis from Oxford Economics towards the end of 2023 warned that excess supply in Chinese real estate could take 'two to four years to unwind, absent a meaningful pick up in demand'.
