1. China Evergrande Group received a liquidation order from a Hong Kong court, setting off a daunting process to carve up the biggest casualty of a property crisis that’s upending the world’s second-largest economy. The ruling earlier today from Hong Kong judge Linda Chan is the latest twist in a saga that saw Evergrande amass more than $300 billion of liabilities during China’s debt-fueled property boom, before turning into the poster child of a market bust that shows few signs of ending. The builder was valued at just $275 million on Monday before trading in its shares was halted, down more than 99% from its peak. Evergrande’s collapse is by far the largest in a crisis that has dragged down China’s economic growth and led to a record spate of defaults by developers. The liquidation will be a test case of the legal reach of Hong Kong courts in China, where most of Evergrande’s assets reside. Any new management will also need to navigate asset sales in an industry lacking liquidity and confidence. Read the rest. (Source: bloomberg.com)
2. Financial Times:
While Evergrande is listed in Hong Kong, almost all of its assets and the vast majority of its more than $300 billion in liabilities are in China. Authorities have so far prioritized the completion of unfinished projects by developers.
The judge’s order will allow a liquidator to attempt to take control of Evergrande’s assets outside China, including Hong Kong-listed subsidiaries that were part of the failed restructuring negotiations.
…In theory, the ruling could pave the way for liquidators to attempt to seize control of some Evergrande assets in mainland China, since Hong Kong has a mutual recognition agreement on insolvency and restructuring that applies in some parts of China.
However, it is not clear how far mainland courts will accept the Hong Kong winding-up order. (Source: ft.com)
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