A court in Hong Kong has deferred a legal petition that seeks to liquidate Country Garden – China’s biggest developer – until January next year.
The decision on Monday gives the struggling debt-laden conglomerate until January 20, 2025 – nearly six months – to finalise a plan for an offshore debt revamp.
Ever Credit Ltd, a unit of Hong Kong-listed Kingboard Holdings, filed the liquidation petition against Country Garden in February for non-payment of a $205 million loan, after the developer defaulted on $11 billion worth of offshore bonds in 2023.
Meanwhile, in related news, creditors for the EV unit set up by developer China Evergrande are also pushing for bankruptcy proceedings – more on that below.
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A lawyer for Country Garden told the court on Monday that the developer expected to publish offshore debt restructuring term sheets to creditors in September, and that it planned to seek approval from the court on that arrangement early next year.
The hearing into Country Garden’s liquidation petition comes against the backdrop of Chinese authorities stepping up efforts to revive the property sector after it slipped into an unprecedented debt crisis in mid-2021.
Multiple developers in trouble
Over the last couple of years, a growing list of developers have defaulted on their offshore debt repayment obligations.
Many are facing liquidation lawsuits filed by creditors, with the latest being state-backed Sino-Ocean Group. A handful, including sector giant China Evergrande Group, have been ordered to be liquidated so far.
In the Monday hearing, Country Garden’s lawyer, Jose-Antonio Maurellet, said the company’s offshore debt rejig is a complicated and large-scale exercise but it is making “substantial progress” with weekly and by-weekly meetings between the company and advisors to creditors.
A bank lender group and a bondholder group also supported Country Garden’s application for an adjournment of the hearing to allow the company to carry out the expected restructuring timeline.
If Country Garden is able to present a debt restructuring proposal to its offshore creditors and get their approval for implementing it, the developer could then push back against the liquidation petition.
A liquidation order against Country Garden would worsen the outlook for China’s property sector, which policymakers are struggling to revive despite waves of stimulus measures since 2022.
Shares of Country Garden in Hong Kong have been suspended from trading since April 2, pending the release of its 2023 financial results.
Maurellet told the court the developer currently has over 40,000 full time employees and 3134 ongoing projects, of which 3,103 are in mainland China. The group’s debt was put at about $190 billion late last year.
Evergrande NEV shares fall again
Shares of China Evergrande New Energy Vehicle fell 7% in Monday morning trade after individual creditors of two of its units sought court approval for the units to go through bankruptcy proceedings and be reorganised.
The electric car maker said its units Evergrande New Energy Vehicle (Guangdong) and Evergrande Smart Automotive (Guangdong) had received notice from a local court about the July 25 application.
“The above notice has a material impact on the production and operating activities of the company and the relevant subsidiaries,” the company said in a filing to the Hong Kong bourse late on Sunday.
The shares slid to HK$0.295 after initially making early gains.
Shares of China Evergrande New Energy Vehicle have dropped nearly 40% so far this year.
- Reuters with additional input and editing by Jim Pollard
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China’s Country Garden ‘Hires Kroll For Liquidation Assessment’
PwC Probed For ‘Enabling Evergrande Misconduct For Years’
Country Garden Warns of ‘Severe’ Tests in China Property Market
Evergrande Founder Banned, Unit Fined For Securities Fraud
