Source : INDIA TODAY NEWS
Chinese authorities have taken fresh steps to deal with the fallout from the collapse of property giant Evergrande, years after the company defaulted with about USD 300 billion in liabilities. A court in Guangzhou in southern China said on Friday it had accepted a bankruptcy liquidation case against Evergrande’s mainland property development unit, a business that industry data shows accounted for much of the group’s overall debt.
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The move came a day after a court in Shenzhen sentenced Evergrande founder Hui Ka Yan, 67, to life in prison for financial crimes. On the same day, dozens of others linked to the group, including Hui’s sons, were also given prison terms of up to 18 years. The latest developments have added to signs that Chinese authorities are trying to bring the Evergrande saga to a close, even as questions remain over how long the process will take and when the wider property market may recover.
Foreky Wong, a founding partner at Fortune Ark Restructuring, said the Chinese government “may already have a road map” for wrapping up the Evergrande saga. “They will need to do these (steps) sooner or later,” he said. However, he added, “Evergrande is such a big company. Its bankruptcy proceedings will last for a while.” Evergrande collapsed after Chinese regulators tightened curbs on excessive borrowing in the property sector in 2020, setting off failures at other developers and a long downturn in the housing market.
What remains unclear is how long it will take to put the property market back on track. The sector was once a key driver of China’s economic boom and accounted for about a quarter of the economy as recently as a few years ago. Home prices have fallen by roughly 20 per cent or more since 2021, with little sign so far of a strong recovery. In many smaller cities, supply continues to outstrip demand, while a broader economic slowdown has weakened people’s spending power.
Evergrande, once seen as too big to fail, became the world’s most indebted developer, and unwinding its debts is taking years. In 2024, after the company failed to reach a deal with creditors, a Hong Kong court ordered the liquidation of the Evergrande group, whose holding company was listed in Hong Kong and incorporated in the Cayman Islands. But Hong Kong and mainland China have different legal systems, and most of Evergrande’s assets and operations are in mainland China. That means court-appointed liquidators in Hong Kong have limited ability to recover those assets for creditors.
Jonathan Leitch, a restructuring partner at Hogan Lovells Cadwalader, said, “There are lots of interesting legal questions thrown up by this PRC ruling that will take some time to play out.” He said one issue would be whether other claims against Hui’s assets would compete with claims being pursued by the Hong Kong liquidators. In Shenzhen, the court that sentenced Hui also ordered his personal assets to be confiscated. Hui is also known as Xu Jiayin and was once said to be China’s richest man.
Hong Kong-based liquidators from Alvarez and Marsal have been trying to trace and recover the assets of Evergrande, Hui and others linked to the company. A Hong Kong judge had earlier barred Hui from disposing of worldwide assets worth about USD 7.7 billion. The liquidators are also seeking USD 8.4 billion from PwC over its role in auditing Evergrande’s financial statements before the company collapsed. Investigations in Hong Kong and mainland China found that Evergrande had overstated its revenues by roughly USD 80 billion in 2019 and 2020 by manipulating financial data. In 2024, mainland authorities fined PwC around USD 62 million over its Evergrande audits, while Hong Kong authorities said in April that the firm was paying a separate USD 166 million in fines and compensation.
Creditors are expected to recover only a small part of what they are owed. Wong said that while the amounts involved may be large, recoveries would likely be in the single-digit percentages of Evergrande’s liabilities, underlining how long and complex the clean-up of the group’s collapse is likely to remain.
With PTI Inputs
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SOURCE :- TIMES OF INDIA
