China Evergrande Group, the embattled property developer, has been granted an adjournment of a court hearing into a liquidation petition until January 29, 2023. The company plans to use this time to finalize a revamped offshore debt-restructuring plan, according to a report by Fen.
The decision by Hong Kong High Court Justice Linda Chan comes after she stated that Monday’s hearing would be the last before reaching a decision on whether to liquidate Evergrande. The news of the adjournment caused Evergrande’s stock to jump over 13%, signaling relief for the company and its investors.
Evergrande has been facing financial difficulties and defaulted on its offshore debt in late 2021. Since then, the company has been actively working on revising its restructuring plan in order to avoid liquidation. The next hearing on January 29 will likely determine whether Evergrande will be wound up if it fails to come up with a plan that is accepted by all classes of creditors.
The liquidation petition was filed by Hong Kong-based investment firm Top Shine in June 2022, alleging that Evergrande had not honored an agreement to repurchase shares. In the court hearing, Evergrande’s lawyer informed the court that the company expects to refine its restructuring proposal in the next five weeks.
The revised terms of the plan involve offering shares to creditors, as well as certificates or the right to proceeds from disposable assets. However, Evergrande must engage in direct discussions with relevant Chinese authorities concerning the new restructuring terms, and the plan will require support from all creditor classes by the next hearing.
Creditors are divided on the revised plan, with some rejecting it because they would receive less than what they would through liquidation. The liquidation of Evergrande would also put more pressure on China’s property sector, a significant component of the country’s economy.
It is worth noting that Evergrande has been working on a debt revamp plan for nearly two years, facing several setbacks along the way. These include the investigation of its billionaire founder and the denial of approval to issue new U.S. dollar bonds.
As the date of the next hearing approaches, all eyes will be on Evergrande as it races against time to secure a viable debt-restructuring plan that can save the company from liquidation and potentially stabilize China’s property sector.
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