Introduction
China Evergrande, the world's most indebted property developer, has received a liquidation order from a Hong Kong court. However, experts believe that there may be little left to recover. Evergrande has been in a liquidity crisis since 2021, and the court order comes more than two years after the company sent the country's property sector into turmoil.
Liquidation Process and Debts
Liquidators will now take control of Evergrande's assets and prepare to sell them in order to repay the company's debts, which amount to a staggering $300 billion. The liquidation order was made after Evergrande failed to offer a concrete restructuring plan, and the court decided that enough time had been given to the company to address its financial situation.
Impact on Evergrande's Shareholders
Trading in the shares of Evergrande and its subsidiaries was halted following the news of the liquidation order. The stock price of Hong Kong-listed China Evergrande Group plummeted 21% before the court hearing. Shareholders and investors, especially those outside of China, may face significant challenges in recovering their investments, and the process could potentially take years.
Challenges and Low Recovery Rate for Creditors
Experts have warned that Evergrande's liquidation will pose challenges, particularly for creditors. Given the scale of the company, the liquidation process is expected to be complex, and the likely return to creditors is anticipated to be low. The Chinese property sector is currently facing sluggish demand and falling home prices, making it difficult to sell Evergrande's assets at favorable prices.
Long-Term Implications for China's Economy
Evergrande's liquidation is seen as a signal that China is willing to take extreme measures to address the property bubble and stabilize its economy. While the short-term impact may be challenging, experts believe that this move could benefit the economy in the long run. China's economy is currently facing headwinds from a property crisis, deflationary pressure, and a demographic crisis.
Conclusion
The liquidation order against Evergrande marks a significant development in the company's ongoing crisis. With little left to recover, the process of selling Evergrande's assets and repaying its massive debts will be a challenging task. The implications of this liquidation extend beyond Evergrande itself and have broader implications for China's economy as a whole.
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By: htan@insider.com (Huileng Tan,Nidhi Pandurangi)
Title: China Evergrande Ordered into Liquidation, Experts Say Little to Recover
Sourced From: www.businessinsider.com/evergrande-ordered-liquidate-china-real-estate-property-crisis-winners-assets-2024-1
Published Date: Mon, 29 Jan 2024 08:22:26 +0000
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